I wanted to follow up on my last blog post "Starbucks Removes "Tall" Size from Drive-Up Menu" as it introduced the idea of Americans becoming more and more conscientious about the money they spend and where it is spent.
Americans are not only watching where they spend their money, but they are also moving their money out of CD's (certificates of deposit) and mutual funds and in to accounts that are considered less risk and with no early withdrawal penalties, such as checking and savings accounts. These accounts typically do not offer a high (if any) interest rate however they do offer peace of mind to the consumer since the money is guaranteed and easily accessible.
According to Market Rates Insight data-analysis firm, CD deposits declined by $200 billion in the first six months of 2010 while deposits in checking, savings, and money market accounts rose by $171 billion. Another reason people are pulling money out of CD's is because rates of return are historically low. The interest rate is not worth having the cash tied up in many cases.
In addition, the amount of consumer spending has continued to dwindle which will also continue to stall our economic recovery. The Federal Reserve's most recent data showed consumer spending in key cities such as Atlanta, Dallas, and NYC had either slowed or declined in July and August. Across the nation the use of credit cards has dropped for the 23rd consecutive month (July). Overall borrowing has dropped 17 times in the past 18 months.
The good news? Interest rates are at an all time low for home buyers..... so if you are questioning where to put your money and want a better return on your investment than checking and savings accounts and CD's, consider the real estate market!
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