The financial challenges New Orleanians face can be as bumpy and difficult to navigate as some of the city’s streets. Affordable housing, access to credit and debt management are but a few of the potholes that have to be considered. With this in mind, Biz recently asked a few local experts in the financial industry for tips on making the ride a little smoother.
Let’s start with high interest rates, which can make it more expensive to borrow money, whether for mortgages, car loans, or personal loans. But while high interest rates can be detrimental for borrowers, they can benefit savers, as president and CEO of Fidelity Bank Chris Ferris explains: “Consumers who have savings accounts or invest in fixed-income assets like bonds can earn higher returns on their investments. This can incentivize saving and discourage excessive spending.”
One strategy Ferris advises to consider is to ladder your CDs.
“Instead of investing all your money in a single long-term CD, you can create a CD ladder,” he said. “This involves dividing your savings into multiple CDs with different maturity dates. As each CD matures, you can reinvest the funds into a new CD with a potentially higher interest rate. This strategy allows you to have access to a portion of your savings periodically while taking advantage of higher rates on longer-term CDs.”
With any strategy it’s crucial to consider your financial goals, risk tolerance and liquidity needs before making any investment decisions. Consulting with a financial advisor can provide personalized guidance based on your specific circumstances.
Guy Williams, president and CEO of Gulf Coast Bank & Trust, also recommends depositors consider laddering their deposit investments.
“Instead of just a money market or six-month certificate of deposit, we encourage depositors to lock in longer rates by buying a one-year, a two-year, a three-year, etc., certificate,” Williams said. “The next move by the Federal Reserve is to increase rates through the end of the year. Next year’s rates will probably decline, so if consumers only make short-term deposits, they will see lower interest rates on their deposits next year.”
Because everyone is different in their risk tolerance as well as their investment horizon, it can be difficult to generalize financial or investment strategies for all or most consumers.
However, John Zollinger, executive vice president and chief banking officer at Home Bank, noted that having the option of immediate use and access to your money comes with a cost. “That optionality generally would not allow you to earn as much as if you tie up the money for a prescribed period of time as in a CD,” Zollinger said. “So, you should expect to earn more on CDs in this environment versus a money market or savings account.”
Zollinger said pricing is always a factor of supply and demand. Because of the Federal Reserve actions and other factors, the supply of money is lower than the demand, thus higher rates are being offered by some banks in the market.
“We have not seen CD or other deposit account rates this high in quite a long time,” Zollinger said. “It is a good thing for many consumers with excess cash to invest in a relatively safe investment like a CD.”
Whatever you choose to do with your money, be sure to check with a financial expert first to make sure it’s the best option for you. According to local experts, that will likely be a local bank, the argument being that they’re more invested in your success than a larger national bank.
Or as Zollinger put it: “People still matter because if you need anything, calling 1-800 is not the best solution.”
John Zollinger
Executive Vice President and Chief Banking Officer
Green Coast Enterprises
“We are in some extraordinary times that we have not experienced in more than a decade. It is time to pay attention to deposit rates and the opportunities that you have now to earn some more meaningful passive income, but like anything worthwhile, you need to work for it. Do a bit of shopping and find the right mix between rate and relationship.”
Guy Williams
President and CEO
Gulf Coast Bank & Trust
“Borrowers can refinance next year when rates, as we expect, decline. It is important to not miss real estate investment opportunities because of higher rates. If interest rates decline, investment property values will be expected to increase.”
Chris Ferris
President and CEO
Fidelity Bank
“It’s important for consumers to stay informed about the interest rate environment and understand how it can impact their financial decisions. Monitoring changes in interest rates and seeking professional advice when needed can help consumers make informed choices regarding borrowing, saving and investing.”
Did you know? The Federal Reserve raised borrowing costs to 5.25-5.5% in July, putting rates at the highest they’ve been since January 2001.
