Time to Dust Off Some Strategies for Rising Rates

After years of near zero-percent interest rates, the investment climate is changing. These tools can help you change with it.


By Karen Bohn


Late last month, the Federal Reserve increased the Fed Funds rate for the third time this year, another reminder that the era of near-zero percent interest rates is history. While higher interest rates can lead to bigger bills for those with credit cards, mortgages or other interest-bearing debt, there is an upside: Consumers can take advantage of the rising rates to grow their savings.


By understanding your options now, you can put your money­—and the current economic conditions—to work for you.


Two effective savings approaches, especially in a rising-rate environment, are depositing cash into a money market account and utilizing a time-deposit laddering strategy.

Money Market Accounts

Is a money market account right for you?

Money market accounts can offer higher interest rates on balances, which means the money you put away may earn more over time than it would in a standard savings account. Be aware, however, that a money market account may require a larger deposit balance in order to benefit from a higher interest rate  (sometimes referred to as an annual percentage yield). There are no limits on how much you can deposit into a money market account, but there are some restrictions as to how you can access the account.

Each month, you have up to six opportunities to make withdrawals and transfers from a money market account. You can make these transactions through checks, an account-connected debit card or online banking (if your financial institution offers online access).

Money market accounts are best suited for those who have funds ready to deposit and are looking for:

  • A safe, FDIC-insured place to put their savings (note that there is an FDIC insurance limit of $250,000).
  • Competitive interest rates to help their money grow.
  • Access to their funds (although there are some limits). 
  • Convenient check or debit features.

If a money market account sounds like it could be right for you, shop around to compare interest rates and features to make sure the account you choose aligns with your fin-ancial goals.

Time Deposit Laddering

What is a time deposit laddering strategy, and should I try it?

Another savings approach is a time deposit account (TD), a savings vehicle that typically allows you to earn interest on your money faster, or at a greater rate, than a standard savings account. With TDs, interest is compounded over set time periods (terms), which means your funds may be more likely to grow over time.

However, the TD interest rate advantages come with a stipulation: TDs lock your money in for the full term, which can range from one month to five years (and beyond). The length of the term is based primarily on the interest rates associated with the TD. As a general rule, longer terms offer higher interest rates. The length of the term also depends on the financial institution offering the TD. For ex-
ample, some banks may only offer terms up to one year, while others go beyond five years.

Accessing the funds placed in a TD before the account reaches the end of its term can be difficult and may involve penalties, fees or charges. These restrictions can make some consumers leery of setting up a TD.

Today’s rising interest rate environment provides plenty of opportunities for consumers to bolster their savings and find a strategy that is best for their financial goals. By understanding your options and making investments now, you can put your money and the current economic conditions to work for you, and grow your hard-earned dollars over time.

Karen Bohn is executive vice president and director of consumer and mortgage client delivery for UMB Bank in Kansas City.

P | 816.860.7000

E | karen.bohn@umb.com