Why Are The Savers Being Punished? Blame The Interest Rates

Why Are The Savers Being Punished? Blame The Interest Rates

We do our best to avoid cynicism, but lately it seems as though no good money decision goes unpunished. Now the savers are suffering: With unbelievably low interest rates meant to stimulate borrowing and the flow of money through the economy, prudent people keeping their money in savings accounts and conservative investments are making hardly any return.

Interest Is No Longer Reliable

This is a particularly big issue for those who live off of their savings, the New York Times reminds us. When retirees (and others) count on interest from their considerable savings to finance the day-to-day, a decreased rate of interest hits like a salary cut. This summer, the average returns from savings account hit a half-century low at .99%. It’s not only savings accounts that suffer, but also traditionally conservative investments such as certificates of deposit. From the Times:

"For example, anyone keeping $500,000 in a 12-month certificate of deposit earning a rate of 1.5 percent annually — one of the best savings rates available nationally these days — would earn $7,500 a year, hardly enough to live on. Just three years ago, that same investment would have generated $26,250."

The Rules Have Changed

With every plot twist of the recession, someone loses. And we ask ourselves why we don’t know better. Why we can’t seem to make the right move. Why traditionally safe investments have changed teams, and why years of saving and investing have hung us out to dry. It appears that the answer lies in the t-word: Traditionally. Circumstances are anything but traditional. Housing bubbles and market busts and recessions that need a capital “R” changed the game, and we’re all scrambling to catch up, playing by the only rules we know. Perhaps it’s time for a new tradition.

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