How to play rising interest rates based on your age

Personal Finance

Many investors who are just starting out grapple with a four-letter word: debt.

If that’s you, you want to watch the interest that you are paying on your credit cards and student loans.

If the money you are charged for using your credit card gets too expensive, shop around for a better deal.

Also take a look at your debts from college or graduate school. If you have a federal loan, those rates will be fixed and will not change.

But if you have a variable-rate loan, you will see the interest rates on that debt increase. Now could be the time to lock in a lower rate.

You should also look to start an emergency fund of three to six months’ living expenses. The good news is that the short-term rate increases will push up the yields on savings and interest-bearing checking accounts, Williams said.

“You’re going to earn a little bit of a return on that now, 1 [percent] to 2 percent potentially, because the Fed is increasing rates,” Williams said.

Keep in mind that you will want to shop around for the best deal when it comes to those accounts, said Scott Hanson, co-founder and senior partner at Hanson McClain Advisors.

“The banks have been very slow to increase rates on their savings accounts” because of the money they are earning on cash deposits, Hanson said.

Online, community or regional banks offer the most competitive deals, while large national banks’ rates have yet to catch up, Hanson said.

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