SAN ANTONIO “Interest rates, savings, mortgages—there is a lot going on in the financial world that can have a significant impact on you and your family.
Mannick Dillon, President of VictoryShares and Solution for Victory Capital, joined Leading SA this weekend to sort it all out and offer advice to families going to college in the future.
“You know, we’ve been feeling the effects of inflation on everyone for a while now, right. Where prices rose quite quickly, in fact, post-COVID environment. And that’s what the Fed is trying to fight. They are trying to moderate or control this inflation. And the way they do it is by raising interest rates. And the way this is happening makes it more costly for individuals and companies to borrow money. This means you spend less, invest less, which helps control demand and lower prices. But on the other hand, whatever impact interest rates have had, you have to look back and say the goal is to bring inflation down, which was also very painful,” Dillon said.
Dillon said the housing market has seen the impact of higher interest rates through rising mortgage rates.
“As interest rates rise, the cost of borrowing rises, and that goes for any type of purchase for which you actually borrow money. And a house is often the biggest purchase a family can make. Therefore, interest rates have risen. And that makes buying a new home more expensive than, say, two years ago. This is something worth paying attention to. So for the same amount of money, you can afford less at home, or maybe people and families are waiting, waiting longer, waiting maybe for price cuts or interest rates to drop before making that purchase,” Dillon said.
But right now, amid economic uncertainty, there may be a silver lining.
Dillon said savings rates and money market rates weren’t as high because of the financial climate.
“In most situations, something positive can be learned from it. Right. And one of them is that savings rates and money market rates have not been as high as they are now for quite some time. So actually, by taking cash, if you have some, if you put some cash aside, you have a fund for a rainy day, you can actually get a good return or interest rate. And what like the money markets are usually really risk-free investments. So a lot of the conversations we have with clients are about what to do with that little amount of money you may have accumulated over the last couple of years, how to make it work for you in the money markets, in the short term. bond funds and the like,” Dillon said.
And for so many families, college is their biggest expense, but there are easy ways to get started early and make those expenses more manageable.
Dillon suggests investing and creating a college savings plan to combat the inflationary impact on tuition bills.
“Inflation over time drives up the cost of tuition bills. A college savings plan is a great tool to combat this because it can participate in raising stock and bond prices when inflation starts to rise. So you can try to keep up. And the best way to do it is consistently. So, we are talking to many of our clients about using the so-called automatic investment plan. So you don’t have to calculate the market and save money for college or retirement, but just put a little bit of money into your job every month, every quarter. And that way you can enter and save more smoothly over time. And so a college savings plan can be a great way to combat what inflation is doing to tuition bills,” Dillon said.
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