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Fed wallops savers again

By Marcie Geffner ·
Tuesday, May 1, 2012
Posted: 6 am ET

The Federal Reserve continued its assault on savers last week, keeping its target for the federal funds rate at zero to 0.25 percent and reiterating its intention to maintain exceptionally low levels for the rate at least through late 2014.

Here's a summary of the Fed's observations.

  • The economy has been expanding moderately.
  • Labor market conditions have improved.
  • Unemployment has declined, yet it remains elevated.
  • Household spending and business investment have continued to advance.
  • The housing sector is still depressed.
  • Inflation has picked up somewhat, mainly due to higher crude oil and gasoline prices.
  • Longer-term inflation expectations have stayed stable.
  • Economic growth is expected to remain moderate then pick up gradually.

That all sounds good, except for the part where savers are again hit hard by the Fed's easy-money stance.

Add the effect of inflation, and the return on savings continues to be nil or even negative. And, thanks to the Fed, there's no end in sight. Consider for a moment that late 2014 is a time horizon of another two and a half years.


Low rates may indeed goose the economy and encourage people to buy homes and cars, but saving matters, too -- especially for people trying to make ends meet on a fixed income or plan ahead for financial emergencies.

The National Foundation for Credit Counseling, or NFCC, the largest national nonprofit credit counseling organization in the U.S., recently noted in a statement that consumers can't know where they're going financially unless they know where they are currently -- and that includes knowing how to save.

The organization advises consumers to "plug the leaks" in the household budget by tracking everyone's spending for 30 days and looking for expenses that can be reasonably reduced.

"With a little effort," the NFCC said, "this (effort) could net an extra $100 per month, enough to begin a rainy-day savings account."

That's excellent advice, though saving would so much sweeter if the rate of return were something more than zero.

Follow me on Twitter: @marciegeff.

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john malia
June 13, 2012 at 12:11 am

You can't "save" money with any bank. Any target retirement fund will do considerably better and is historically just as safe. They will pay about 5% which is a lot better than the banks and credit unions 0.15, 0.25, percentages

June 12, 2012 at 11:14 pm

At the rate things are being priced now, there will not be much left of my savings anyhow. It is silly to be worried. But a lot of good people are hurting. I have had to stop donating to any cause since the death of my husband, plus no shopping for even clothes. So what? Tough going ole gal, make the best of whatever happens?Insurance on my humble home rose $12... I suppose to keep their pockets jingling.

June 09, 2012 at 3:31 pm

Del - you need to double-check your regulations before posting. Savings accounts are limited to 6 withdrawals per month under federal regulation (and this does NOT apply to withdrawals in person or at the ATM). Transfers into or deposits into a savings are unlimited. Your bank may impose other restrictions, but in that case I'd find a new bank.

Holly Spruce
June 08, 2012 at 9:31 pm

Buy gold - your paper is worthless.

June 08, 2012 at 9:24 pm

And couple that with the fact that new government regulations require you to be penalized if you make more than 6 transactions affecting a savings account within a calendar month. They could all be transfers from a checking account into savings, have been done online without human involvement, and have been between accounts at the same bank, but still, you must receive a letter warning you of your "bad" behavior, and be charged a fee.

The letter begins with "All savings accounts are subject to certain transaction limitations under federal banking regulations..."

Interest earned is so pathetically low, even on a $50k balance, that it makes it more viable to close the savings account.


June 07, 2012 at 8:09 pm

Um, guys did anyone ever explain to you what happens when the govt has to keep sending out checks paid for in more debt (measured now in trillions with a T), rather than financing the debt with the surpluses - it's called inflation, actually it's called hyper-inflation, and in the absence of reasonable policies that include adequate revenue, the presses will roll on.

C E Stewart
June 06, 2012 at 11:20 pm

WHY would people try to save??? It doesn't provide anything for the saver since the Feds seem to think savers don't need any return on their money. In Illinois, the State Income Tax was increased. This tax further reduces any interest the saver would receive. The Federal Government also gets their cut. What is left for the saver???? NOTHING!!!!