JULY 19 . 2003 • Q-NOTES
19
Getting better
yields on your
cash
Have you checked your bank statement
lately? If so, you may have noticed that your
savings account probably isn’t providing a
very good return on your investment these
days. With the Federal Reserve Bank contin
uing to keep interest rates at or near record
low levels, the return on standard cash
equivalents, such as money market accounts
and traditional savings accounts, is only
slightly better than that provided by your
average piggy bank.
According to Bankrate.com, a rate-track
ing company, the national average interest
rate for passbook and statement savings
accounts is currently about I percent. In fact,
the drop in interest rates has lowered the
rates of most investment accounts tradition
ally thought of 'as savings vehicles.
Fortunately, there are some financial strate
gies that may help balance out low interest
rates and put your money back to work.
CDs can still offer benefits
Certificates of deposit (CDs) generally
feature the highest interest rates available
from a government-insured savings vehicle.
Both the principal investment amount and
the interest earned are federally insured up to
$ 100,000 per account. While rates for CDs
have also dropped, they can often still pro
vide higher returns than most traditional sav
ings accounts. For example, according to
Bankrate.com, six-month CDs were general
ly earning in the range of .95 percent to 1.32
percent in mid-June, while one-year CDs are
usually falling into the 1.01 percent to 1.6
percent range.
With a CD, you’ll need to keep your
money invested until the certificate matures
or you will face a penalty for early withdraw
al. The average CD term ranges from about
three months to five years or more. Generally,
the longer the CD term, the higher the inter
est rate applied to your investment.
A ladder may help even out the lean times
Traditionally, many investors have used a
savings strategy called “laddering” when
investing in CDs. Laddering occurs when you
buy a series of CDs with staggered, or “lad
dered,” maturities. For example, if you had
$2,000 to invest, you could purchase four
separate $500 CDs with three-month, six-
. J. LYNN DfiVIDSON
month, nine-month and one-year maturity
dates. As each CD matures, you could roll the
total into a one-year CD.
The process of laddering CD maturities
moves the funds available for you to use, if
needed, every three months. Laddering can
also help even out interest rate fluctuations.
If rates drop, you’ll still be locked in at high
er rates for a portion of your investment.
When rates rise, your next rollover can take
advantage of the higher rate.
Just starting?
Consider shortening your ladder
If you’re thinking about starting a CD lad
dering strategy now, you may want to keep
your ladder short. Rather than locking your
money into long maturities of five years or
more, consider establishing shorter maturi
ties, from three months to a maximum of one
year. As your CDs mature and interest rates
begin to rise, you might extend your ladder
further by reinvesting in CDs with longer
maturities.
Treasury securities offer safe alternative
If security is your primary concern, few
alternatives offer the safety and guaranteed
returns of CDs. But because the U.S. govern
ment has never defaulted on a loan, U.S.
Treasury securities are among the safest
investments available, offering easy access to
your cash, competitive interest rates and, in
some cases, tax advantages.
Reduce your debt load
If you’re currently carrying high-interest
debt, such as a credit card balance, you may
want to consider paying down your debt
with a low-interest loan. Keeping your debt
low is always a good idea, and paying off
high-interest loans can provide a healthy
return. Before you consider such a step,
however, you should already have an emer
gency fund in place equal to three to six
months of your basic living expenses. An
emergency fund can help cover unexpected
expenses caused by events such as car trou
ble or job loss.
Carrying a substantial high-interest debt
can cost you hundreds of dollars in interest.
For example, if you make a monthly payment
of $30 on a $1,000 credit card bill charging
15 percent interest, it would take you three
years to repay your debt. In that time, you’d
end up paying more than $244 in interest.
Let a professional be your guide
Consider relying on the experience of a
professional financial advisor to discover the
Saturdays
DJ br. D w/brag Show
at Midnight
JILJL nJI '
Asheville’s Most Diverse Club
Open 7 Nights
8 pm to 3 am
Tues. 4 Thurs.-Karaoke
full range of higher-
interest savings and
investment vehicles
available to, you.
Your qualified finan
cial advisor can
review your overall financial picture and help
you find the options that best fit with your
future goals and plans.
American Express Financial Advisors inc. Member NASD.
American Express Company is separate from American
Express Financial Advisors Inc. and is no! a broker-dealer.
info:
phone: 704-987-9794
email: lynn.j.davidson@aexp.com
Dry Cleaning
Alterations. Drapes, Comforters
Hours: Mon.-Fri.-7 am-7 pm: Sat.-8 am-6 pm
*1.70 ea.
Any Dry Cleaned & Pressed Garment
This coupon good for an uniimiled number of items.
Excludes Suede & Leather
Advance Payment Required
3203 Eastway Dr.
Charlotte, NC
704.531.8084
www.BenleesI .com
Centra)
! 1
1 “
□
Bcnlcc’s^^H
Food Lon
|e. Rebuild...
I Worth It!
♦ Swedish Massage
1- • Neuromuscular
• Hot Stone Massage
• Craniosacral
• Personal Training
, • Weight Management
lQOI
• off-site Service Available
• Packages and Gift Certificates
38 N. French Broad Ave. • Asheville, NC • (828) 258-2027 • www.clubhairspray.com