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Lousy Interest Rates = Spend

January 28, 2010 by Neville

When the economy sucks, the government will generally lower interest rates so it’s more enticing for you to SPEND money rather than SAVE.

Well they’ve done that big time right now, and I did a little sleuthing around at some of my non-risk-bearing accounts.
Example:
About 5 years ago I set up an Emigrant Direct account because internet banks usually offer higher interest rates than most traditional banks…and I’ve pretty much forgotten about it.
I stashed away about $25,000 in that account and checked it recently to be greeted with:

1.2% annual return??? HAHAHAH!!

This means my roughly $25,000 will earn $300 for a whole year of sitting there. Meanwhile the inflation rate right now is “officially” between 3-4%….and in reality is probably much higher.

So while I earn $300, my money loses $750 in value (at least). The account is no longer a “No risk” account…it’s now a money pit.

Well that’s a losing proposition, so while I already have an investment account I use to throw into businesses that make me money, it looks like I’ll be almost forced to put some of that money to good use.

However with all the current tax breaks encouraging businesses to spend right now, taking money out of permanent savings accounts and spending them on money-making endeavors seems a smart idea right now.

Shopping spree time :-D

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