Rising rates may mean it’s time to put more money in savings accounts, certificates of deposit and Treasury bills
4 min
Stop dwelling on what you’ve lost thanks to rising interest rates and take advantage of the opportunities they present.
High rates are expected to linger for a while and they are having a corrosive impact on some parts of our finances. Taking out a $500,000 mortgage to buy a home today will cost you about $400 more a month than it would have a year ago in a standard 30-year mortgage. That is not to mention higher rates on credit cards, personal loans and other products for borrowers.
The high-rate periods can also bring juicy, high yields on savings accounts, certificates of deposit and Treasury bills—that is, banks are paying you to let your money sit there. And anyone can take advantage, regardless of income.
Dena Bashri opened a SoFi savings account last fall. It now yields 4.5% a year. She wanted a higher return than she was getting at her local credit union.
Bashri, 25 years old, is a senior director at a fundraising firm and makes roughly $92,500 a year. She saves money on rent by living with her parents in Virginia so she’s able to contribute about $4,900 each month to her savings account. She’s already earned close to a few hundred dollars in interest and hopes to continue building her rainy-day fund, she said.
“Emergency savings offers me the flexibility to take risks but also financially anticipate any life changes that may happen,” Bashri said.
Here’s a financial road map for making the most of great yields while staying on track with your short- and long-term money goals.
Living paycheck to paycheck is now the norm for most Americans.
Financial advisers urge those holding large amounts of debt to first pay down high-interest balances. About half of people carrying credit-card debt allow those balances to roll over into the next month, according to a recent Bankrate survey.
Credit-card interest rates are at record highs, making that debt even more expensive to maintain. Putting money in a savings account with a 4.5% rate will help little if you haven’t paid down your Visa balance with the current average rate of 22.16%.
“Although you may be able to set aside a certain amount of money in a savings account, if you’re potentially offsetting that with not paying off higher debt, that’s an important consumer consideration,” said Courtney Mitchell, head of consumer deposits, products and payments at TD Bank.
For avid debit-card users, high-yield checking accounts are worth consideration, financial advisers say. These accounts can be found at credit unions and online banks and are yielding up to 6%. That interest can then be linked to a high-yield savings account. This is a good option for debit-card users who want to get a start on their emergency fund.
But try not to keep more than one month’s worth of expenses sitting in a checking account, said Rob Williams, managing director of financial planning and wealth management at Charles Schwab. Research shows money sitting in a checking account is more likely to be spent than money in a savings account.
For those who can sock away at least a little bit each month, even putting $25 in a high-yield account can make a difference, said Mitchell.
If you contribute $25 a month to a savings account yielding 4.5%, you will have roughly $300 in a year including interest.
Putting that money toward emergency savings? Liquidity is key so that when something unexpected happens, like a flat tire, you can get the money quickly. High-yield savings accounts are the best places for emergency savings because they allow easy withdrawals, financial advisers say.
“You really need emergency savings to be in something you can get at as soon as possible and also without a penalty,” said Mark Hamrik, senior economic analyst at Bankrate.
Financial advisers recommend building up six months to one year of expenses in an emergency-savings account. Homeowners should save a little more for unexpected repairs.
Once you’re comfortable with your emergency savings, you can set aside money for holiday gifts, vacations and other short-term goals such as a down payment on a car.
The run of interest rate increases has made certificates of deposit popular again. If you are comfortable locking money away for a period of time, consider a CD for some of these short-term goals. Many six-month to one-year CDs are offering yields above 5%.
It can be helpful to divvy up your high-yield savings for coming expenses.
Erin Confortini, 24, is a freelance marketing consultant based in Pennsylvania who made about $120,000 last year. She has three high-yield savings accounts for her short-term savings goals.
Each month, Confortini puts $150 aside for car insurance, $300 for coming vacations and $200 toward Christmas and birthday gifts, she said.
“It’s really great that now that rates are increasing, we do have an option to earn a little bit of money,” Confortini said.
You’ve got at least one month of expenses in your checking account, you’ve beefed up emergency savings and you’ve set aside buckets of money for anticipated expenses.
Maybe it’s time to get more money out of high-yield savings. Keeping all of your money in savings isn’t a strategy for wealth building because the interest gained on high-yield accounts likely won’t outpace inflation in the long run, said Kyle McBrien, a certified financial planner at Betterment.
One simple way to take advantage of rates and get out of high-yield savings is Treasurys.
Take Victor Cipolla, a 33-year-old entrepreneur in New York.
Cipolla moved $30,000 from his high-yield savings account into a Treasury bill after he noticed that rates were going up. The bill currently yields more than 4% and he reinvests the money in another Treasury bill every six months when it matures, he said. The average yield on a six-month Treasury bill is 5.3%.
“We’ve always had this low interest rate environment, so this is a new area to navigate,” said Cipolla.
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Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
