Grow Money Safely as Inflation Spikes

With so much talk about how inflation is making everything more expensive and all of the attention on the Federal Reserve’s steady interest rate hikes and how expensive borrowing is becoming, it can be easy to overlook an important inverse fact. For the first time in a long time, saving can become a valuable strategy because of those same rising interest rates.

In fact, individuals taking advantage of certain savings programs can actually reap a benefit from higher interest rates. If you’re a saver, inflation and the Fed’s efforts to control it can actually be a good thing. Here’s how.

The Fed, Inflation and Interest Rates

Interest rates have been steadily climbing—from less than one percent in March 2022 to a range of 4.5 to 4.75 percent in February 2023. With increases in nearly every month in between, the FOMC—the 12-member Federal Open Market Committee—raised the rate by 4.25 percent, and the most recent increase in February 2023 raised the costs of borrowing to levels not seen since 2007. More incremental increases are expected throughout 2023 until inflation goes back to its targeted level of two percent.

Finance experts seem to think that may take a while as the Fed ties its interest rate decisions to the labor market and inflation.

• January 2023’s jobs numbers released in February showed increases in nonfarm payrolls of 517,000 versus the projected 187,000, and unemployment fell to 3.4 percent, slightly lower than the 3.6 percent estimate.
• While inflation peaked in June 2022 at 9.1 percent, gradual decreases have brought it down to 6.4 percent in January 2023.

The thinking is that a hot labor market often means increases in wages to recruit talent. Employers often then pass on those increased costs to the consumer, resulting in higher prices for services and goods and accompanying inflation. Being able to assess an interest rate change’s full effect takes time. So, while right now may not be such an advantageous time to spend, it can be a great time to save.

Why Save When Inflation Is High

When inflation is high, the cost of everything rises. Your money doesn’t go as far. The bag of groceries that used to cost about $40 now costs $50 or more. Cars and houses, for example, cost more, and if you have to borrow money to buy, the loan will cost more too. Even using a credit card can be more expensive if you’re unable to pay off the monthly balances. Many financial advisors recommend that you hang on to your money, and it makes sense for a number of reasons.

• As long as consumers continue to buy and fuel higher prices, the Fed will continue to raise rates until inflation falls. By saving money instead of spending it, you’re doing your part in controlling inflation.
• Emergencies and unanticipated problems happen. Cars break down and need repairs, home systems eventually need to be replaced, and health challenges often have accompanying bills. Maintaining savings as an emergency fund gives you the option of not having to run up large sums on a high-interest credit card.
• Placed wisely, savings can grow in a low-risk investment environment that’s safer than many other vehicles. Yes, over the last decade, savings instruments were often overlooked because they were typically earning less than a percent in interest. However, with rising interest rates, financial institutions are now offering much better rates of four percent or better. That’s the difference between $10,000, for example, earning less than a hundred dollars over a year versus that same $10,000 earning $400 or more for the year.

While high-interest rates may make many material goods and services unaffordable, those same high-interest rates can help your money grow safely until prices correct and stabilize. If you have savings, and you’re not taking advantage of the rise in interest rates, it’s time to start looking around. If you’re in Louisiana, La Capitol Federal Credit Union and our share certificate savings accounts are a great place to start.

La Capitol Share Certificate Savings Accounts

Instead of letting a financial nest egg languish in a low-earning account, put that money to work earning healthy dividends. Share certificate savings accounts are what most banks call CDs—certificates of deposit. With a share certificate savings account, you can put away a lump sum of money for a specified period of time and earn an agreed-upon amount of interest.

Share certificates are great ways to set aside a sum that you don’t want to touch, yet it will grow, compounding monthly throughout the term of the account. At the end of the term, you can let it roll over, reinvest in a more advantageous share certificate, or take your money and earnings to use as you see fit. We have share certificates suitable for every budget and timeframe.

Our Other Share Certificates—Whether you want to save a little or a lot, we have a share certificate savings account for you.

• 91-Day Share Certificate—In just three months, you can grow your deposit of $5,000 or more by two percent. Dividends post at the certificate’s maturity.
• Six-Month Share Certificate—In six months, you can grow your deposit of $2,500 or more by 3.50% APY.¹ Dividends are compounded and posted monthly.
• Thrifty Saver Share Certificate—Open a share certificate savings account with as little as $500 invested for three, four or five years. Or, invest $1,000 for two years or $1,500 for a year. Dividends are compounded and posted monthly.
• Super Saver Share Certificate—This certificate also has a minimum deposit of $100,000 with terms of one to five years. While it doesn’t have a one-time bump option, it offers a slightly higher dividend than a mega saver account's initial dividend. Dividends are compounded and posted monthly.

[Explore Your Share Certificate Options]

Making High-Interest Rates Work for You

If the idea of making your savings actually grow has you excited, take a look at our Share Certificates page. When interest rates climb, the possibilities for earning do too. At La Capitol Federal Credit Union, we want to help you do more than just save. We want to help you thrive and grow.

References:

• https://tradingeconomics.com/united-states/interest-rate
• https://www.bankrate.com/banking/federal-reserve/how-much-will-fed-raise-rates-in-2023/
• https://www.cnbc.com/2023/02/03/jobs-report-january-2023-.html
• https://www.bls.gov/schedule/2023/home.htm
• https://tradingeconomics.com/united-states/inflation-cpi
• https://www.pbs.org/newshour/politics/heres-what-the-federal-reserve-interest-rate-hike-means-for-you
• https://www.lacapfcu.org/share-certificates

1 La Capitol Certificate Accounts are term Share Accounts. The APY is fixed at the time you make the initial deposit to open or renew the account, and will not change during the term of the Certificate. The APY given above assume dividends remain in the account until maturity. A withdrawal of dividends will reduce earnings. Dividends earned are posted and compounded monthly unless otherwise paid, except for the 91-Day Account, to which earnings are posted at maturity. You may choose to have your earnings compounded in the Certificate Account, or transferred to your La Cap savings or checking account. Applicable fees and other conditions could reduce the earnings on your account. Substantial penalty for early withdrawal. Effective Date: 10/09/2026

2 Membership is required. APY = Annual Percentage Yield. The annual percentage yield is a percentage rate that reflects the total amount of dividends to be paid on an account based on the dividend rate and frequency of compounding for an annual period. For all accounts, the dividend rate and annual percentage yield are fixed and will be in effect for the initial term of the account. For accounts subject to dividend compounding, the annual percentage yield is based on the assumption that dividends will remain on deposit until maturity. A withdrawal of dividends will reduce earnings. The minimum opening deposit for Thrifty Saver Share Certificates varies by term: 1 year = $1,500.; 2 year = $1,000.00; 3, 4, & 5 year = $500.00. The minimum opening deposit for Super Saver Share Certificates for all terms is $100,000.00. Additional deposits are not allowed during the term of the certificate. Dividends are compounded and credited monthly. Certificates will automatically renew at rates effective at the time of renewal. An early withdrawal penalty may apply for withdrawals made before the maturity of the certificate. For the Thrifty Saver, Super Saver, and Mega Saver Certificate accounts, you will earn a higher rate and APY when the same membership includes an open checking account. If the checking account is closed before the certificate matures, the certificate rate and APY will decrease to the current rate, and APY available for the certificates without a checking account. The penalty schedule is Terms of 1 year to less than 3 years 180 days’ dividends and Terms of 3 years or more 365 days' dividends. During the term of the Mega Share Certificate, you are permitted to make a one-time request to adjust the dividend rate to the effective dividend rate of the Mega Share Certificate of the same term limit as your Mega Share Certificate. The new dividend rate will be paid for the remaining term of the special share certificate. The term of the special share certificate will remain the same. Federally insured by NCUA. Effective Date: 10/09/2026