While it is encouraging that CME is predicting rate increases for 2022; we have no assurance that these will result in significant savings and CD rate increases--especially in light of the continued unfavorable loan-to-deposit ratios. Additionally, we are aware that even snagging a relatively high savings or CD rate will not overcome the erosion of our currently high rates of inflation. During these times, it seems important to consider and exercise strategies over which we have control. I have listed a few below; and must offer the disclaimer that these are the strategies I am personally considering. I do not have the credentials (CFP, CPA, CFP) to officially offer financial advice to others.
1) Making extra principal payments towards debts: Paying down debt has the same effect as putting money into savings. For example, if you make an extra 1000.00 payment on a 9% credit card debt, it is like earning 9% in savings. Even if your only debt is your mortgage, the same principle applies: If you have a 4% mortgage and make an extra 1000.00 principal payment it is like earning 4% (and even more than that if your payment accelerates the time frame by which your PMI is paid off).
2) Series I savings bonds: Are currently over 7% due to high rates of inflation. See the Treasury Direct website for more details.
3) Consider deferring or decreasing purchases of highly inflated non-essential items: For example, neighborhood restaurant prices and raw meat prices have skyrocketed (one place charges 20.00 for a medium 3 item pizza that used to be 13.00, viz). We eat out less; and wait until raw meat is on sale before purchasing. That has helped our budget and our waistline. As one reader pointed out, we can't control inflation, but can control our purchases.
4) Build Up Emergency Savings: While this may seem to contradict what I have said above, please remember that one must have emergency savings built up regardless of interest rates. For me, I believe that a minimum of six months of emergency savings is essential (with at least 12 months being ideal). So don't let near zero savings interest rates deter you from building up emergency savings.
Please feel free to share your suggested savings strategies for 2022: