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3 ways I’m using sky-high interest rates before 2022


3 ways I’m using sky-high interest rates before 2022

In 2022, the Fed’s interest rate rises and soaring inflation dominated American finance. To limit inflation, the Fed hiked interest rates for the sixth time this year on November 2.

Interest rates can make debt repayment, borrowing, and mortgages more expensive. I’m excited to take advantage of this year’s higher-than-usual interest rates, unlike some of my friends.

I’ll use high interest rates before 2022 in these ways.

1. Looking for the best savings account

As interest rates have gone up over the last few months, some banks have begun to raise the interest rates on high-yield savings accounts.

Since most of my money is in cash, putting it in a savings account with the highest interest rate can help me earn thousands of dollars a year without doing anything.

That’s why I always look for the best rates from different banks. As of today, the interest rate at my bank is 2.5%. Other banks, like CIT Bank Savings Connect (3.25%) and UFB Elite Savings (3.16%), are giving out more right now.

Even though these interest rates can change at any time, I plan to keep an eye on them over the next few weeks and then decide if it’s worth it to move my money. If I can get an extra 1% somewhere else, that could be worth a few thousand dollars a year.

2. Putting money into bonds

A lot of my money is in stocks right now. I’d like to change that, though, because when interest rates go up, the stock market starts to go down. That’s because when rates are high, companies will borrow less money, which means their earnings will grow more slowly than expected.

I’m thinking about bonds as a possible investment for the first time. Bonds are fixed-income securities in which an investor lends money to a company or the government for a set amount of time. When interest rates go up, bond prices tend to go down, but the yield is still higher.

For example, the rate on a 10-year treasury bond is now 4%, while it was only 1.52% last year.

I bonds from the US Treasury are another type of bond I want to buy. At the moment, their annual interest rate is 6.89%. This is down from a record high of 9.62% earlier this year. Even though this is a good way to grow your money with low risk, you can only buy $10,000 worth of I bonds each year.

Adding more bonds to my investment portfolio could be a way to diversify my investments and even grow my net worth, especially when interest rates are high and my cash in the stock market is taking a hit.

3. Investing in companies with a lot of cash

Over the last few years, I’ve wanted to learn more about each company I invest in and, by the end of the year, buy stock in just one or two companies that I think will give me a good return over the next ten years.

When interest rates go up, one type of company to invest in is one that has a lot of cash on hand. That’s because they make more money from their cash reserves and don’t have to pay high interest rates to borrow money, which drains their money.

When researching these kinds of companies, it’s best to look for ones with a low debt-to-equity ratio because they are less likely to go bankrupt or default on loans during a recession or economic downturn. You can also look for companies that have more cash than they need by looking at their quarterly reports or balance sheets.

Alphabet and Berkshire Hathaway are two companies I’m thinking about putting money into. Both have a lot of cash and low-risk investments, securities, and other assets on hand. From what I’ve learned, both of these companies look like good places to put money, even if interest rates keep going up.

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