Who is the Fed and Why Should You Care?

Do you listen to news about the economy? Ever heard of "The Fed"? Probably. So, what is the Fed is and how can it impact you? Learn how the central bank of the United States works and how it affects your finances.  You'll be better prepared for making long-term plans and financial decisions. Understanding the Fed gives you an idea of what the economy is currently like, what's going to happen, and how it affects you. (Your business, your job, your loans, and/or your investments.) Here are a few basic facts about the Fed: It is not a government agency. Private banks own the Fed. It operates independently of the U.S. government. But, the President does appoint its Board of Governors. The Fed has 3 mandates: maximize employment, stabilize prices and moderate long-term interest rates. It sets important interest rates. The main way the Fed impacts the economy is by setting the Federal Funds Interest Rate. Every other interest rate uses that as a basis. In general, when the Fed lowers interest rates, the goal is to stimulate the economy. They usually raise rates when they want to slow down the economy. The Fed manages these rates through the Federal Open Market Committee (FOMC).  FOMC meets 8 times each year. After each meeting, the FOMC issues a press release about the general U.S. economy and whether the Fed will raise interest rates. How does the Fed Funds rate impact consumers? It's true consumers do not  borrow money directly from the Fed. But, the financial institutions that provide their car loans and mortgages do. By raising rates, the Fed raises the cost of what your bank has to pay  to get money.  In turn, raising and lowering it affects the rates you, the consumer, can get from your bank. So, what do you do if you're in the market to buy a house and you hear that the Fed may be raising interest rates soon? Act fast to secure a lower interest rate for your mortgage. Are higher rates always bad for consumers?   No, it's not all bad. Yes, loans will become more expensive. But, you'll also earn more interest on your savings account and any interest-bearing investments! Keep these basic concepts in mind to create better a financial plan for yourself. If you want to learn more about the Fed, stop in and chat with us.

Tips to Save Money at Home this Summer

When the temperature goes up, so do energy bills, water bills and a host of other home-related costs.


Here are a few tips on how to stretch your household budget this summer and still stay cool.

Use ceiling fans.

Delay turning on the A/C, instead get the air moving with the ceiling fan.  If its a cool summer evening you can also leave your windows open.


Make sure you have the blades spinning in the right direction though! In the summer, your ceiling fan should spin counterclockwise as you look up at the fan blades. You will feel a cool downward airflow when you stand directly under the fan. In the winter, your ceiling fan should spin in a clockwise direction. Check your owner's manual for how to switch the direction on your fans.

Invest in a programmable thermostat.

Want an easy, low cost way to cut your energy bills? Program your thermostat.


How does a programmable thermostat help? It prevents large temperature swings throughout your home. This could save you up to 10 percent on your cooling bills.


A homeowner can save as much as $150 - or even more - on air conditioning bills by setting a thermostat.

Upgrade your old air conditioner.

 Does your old air conditioner have an EER energy efficiency of 5? You can cut costs in half by replacing it with a new one with an EER of 10.


So do a simple calculation: If your average annual bill is $260, your bill would become $130.
Depending on the size of the unit and room, your annual savings will pay for the unit in just a few years.


Have you thought about filters?


Air conditioners are more efficient, less costly, and  last longer when you replace or clean their filters on a regular basis. Read your owners' manual to find out how often you should replace or clean filters.

Unplug electronics when they're not in use.

Even when you turn electronics off, they can suck power out of outlets. (For example, television sets, DVD players, computers and phone chargers.)  Either unplug them when you're done using them or use a Smart Strip (which cuts power when it's not needed).




One last tip: using overhead fans, especially at night, is more cost effective than turning down the thermostat.

Savings Account Options: What's the best way to save money?

The WBA shared some pointers on choosing the right savings account for your needs.


Creating a "rainy day fund" or building up savings is a top financial goal for many consumers, usually falling just below paying off debts in consumer polls. If increasing your short-term savings is on your financial to-do list, there are a few different options for you to consider. After all, not all savings accounts are the same.

Here are a few to keep in mind:


Traditional Savings Accounts
 
Traditional bank savings accounts are what most consumers are familiar with. These are deposit accounts that can be tied to your checking account for easy transfer of funds, and typically have the most freedom to allow for withdrawals. These accounts have terms that can vary widely from bank to bank, and many institutions offer several different savings account options to fit different consumer needs. For example, the same bank my offer a savings account that has a minimum balance requirement and a different savings account that does not have a balance requirement but has a set limit of five withdrawals per month. Savings accounts also vary by monthly service fees, interest rates, method used to calculate interest and minimum opening deposit.


Money Market Deposit Accounts

Money market accounts are similar to traditional savings accounts, but most require you to maintain a higher balance to avoid a monthly fee. Where savings accounts usually have a fixed interest rate, money market accounts have rates that vary regularly based on money markets (which is where they get their name). This type of savings account can have tiered interest rates, providing more favorable rates based on higher balances. Some money market accounts also allow you to write checks against your funds, but on a more limited basis than a checking account.


CDs
 
No, not those things we used to listen to music on before iPods. A Certificate of Deposit account is a type of savings account that bears a maturity date, which means once you open it you can't withdraw money from it without penalties until the account matures. The term of a CD generally ranges from a few months to five years, with the higher (better) interest rates being on the longer terms. These accounts also pay at a higher interest rate than other types of deposit accounts, but instead of paying interest to the account periodically over the life of the investment, it pays all of the interest at once when the account matures. An additional benefit: CDs are insured by the FDIC, so even if the bank you keep yours at closes, you won't lose a single cent.

No matter which savings account option you choose, be sure to consult with your local banker first. They'll be able to go over additional account options that may be specific to your bank and might be a better fit for your financial goals.



Peoples State Bank, Memeber FDIC