Financial prudence doesn’t pay much these days

Steve Lyon
Prudence doesn’t pay much these
days for the savers among us.
Dutifully putting money aside in
a savings account over the past decade
has earned about enough interest to buy
a mocha latte at Starbucks
once a year.
Didn’t Ben Franklin exhort
that a penny saved is a
penny earned? Sorry, Ben.
A penny saved these days
won’t even keep up with inflation.
The Federal Reserve, if
you’ll recall, started cutting
interest rates a decade ago
during the Great Recession
to “prime the pump” of an
economy on the skids.
Last week the Fed reduced
interest rates again. Ostensibly,
fiscal the move was intended to bolster
the economy, but keeping the stock
market juiced up seems just as important
to the Fed.
While cutting the interest rate makes
money cheap for businesses to invest in
new equipment or expand, it doesn’t do
much for the small-time saver or retired
folks who were counting on making a little
off their bank accounts.
When the Fed cuts rates, banks and
other lending institutions
respond by cutting CD and
savings interest rates. Money
is cheaper, so banks don’t
have to pay you much for
your savings.
The low interest rates for
savings and CDs over the
past decade since the Great
Recession have cost depositors
something like $1.5 trillion
in purchasing power, according
to a story on CNBC.
Interest rates were going
the other direction for a while
in the past couple of years.
The Fed had been increasing rates since
2015 as the economy picked up steam to
keep inflation in check.
As the Fed raised rates, so did banks
on interest on deposits. Some of the online
banks were offering as much as 3
percent on CDs earlier this year. That was
the best return in a decade, and now it’s
going in the other direction once again.
The quarter-point rate cut by the Fed
does reduce interest rates on credit cards
and mortgages, but the savings is peanuts
to the average person.
Anybody looking for a return on their
hard-earned savings is almost forced to
put those dollars into the stock market
and hope the good times continue.
It’s been a bull market run in stocks for
the past decade. The $60,000 question is
whether it has more room to run or is it
at the top? Only the suits on Wall Street
know the answer to that one.
It’s a dilemma for anyone who is retired
or looking at retirement in the next
five years. You can put money in savings
for the peace of mind and make a pittance
or you can take on some risk with
the stock market.
What will be the Fed’s response when
the economy sputters for real?
Steve Lyon is the editor of the Weiser
Signal American. Contact him at


Signal American

18 E. Idaho St.
Weiser, ID 83672
PH: (208) 549-1717
FAX: (208) 549-1718

Connect with Us