{"id":17403,"date":"2024-09-27T08:01:55","date_gmt":"2024-09-27T15:01:55","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=17403"},"modified":"2025-08-27T11:10:58","modified_gmt":"2025-08-27T18:10:58","slug":"money-when-interest-rates-decrease","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/","title":{"rendered":"How To Make the Most of Your Money When Interest Rates Decrease"},"content":{"rendered":"\n<p>Recently, the Federal Reserve lowered the target range for the <a href=\"https:\/\/www.wealthfront.com\/blog\/how-the-fed-funds-rate-impacts-the-wealthfront-cash-account\/\">federal funds rate<\/a>. This decision affects most consumer interest rates, so it\u2019s normal to wonder what this change might mean for you. In this post, we\u2019ll explain what interest rate decreases mean for your money and how you can make the most of your savings in a decreasing interest rate environment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What to do with your short-term savings when interest rates decrease<\/h2>\n\n\n\n<p>When the federal funds rate decreases, the interest you earn on your short-term savings in a bank account (like a savings or checking account) or a high-yield account (like the <a href=\"https:\/\/www.wealthfront.com\/cash\">Wealthfront Cash Account<\/a>) will generally go down, too. This means your cash probably won\u2019t earn as much interest as it used to.<\/p>\n\n\n\n<p>This is a great reason\u2014and opportunity\u2014to review your finances and check that you\u2019re not <a href=\"https:\/\/www.wealthfront.com\/blog\/3-signs-youre-holding-too-much-cash\/\">holding too much cash<\/a>. As a general rule of thumb, we suggest you hold enough cash to cover the following items:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A good <a href=\"https:\/\/www.wealthfront.com\/blog\/build-emergency-fund\/\">emergency fund<\/a> (for most people, this is between 3-6 months\u2019 worth of expenses)<\/li>\n\n\n\n<li>Your regular monthly expenses (bills, groceries, etc)<\/li>\n<\/ul>\n\n\n\n<p>Even when interest rates are relatively high, you are likely better off investing your excess savings (which we define as any savings beyond the items listed above) than keeping them in cash and earning interest. This is because your savings are much more likely to keep up with inflation if you invest them\u2014particularly after you account for taxes.<\/p>\n\n\n\n<p>When interest rates are falling, it\u2019s also a good time to reevaluate <em>where<\/em> you keep your cash. Ideally, you would keep your cash at an institution you trust to pay you a competitive APY in both high- and low-interest rate environments. To determine this, look for institutions with a <a href=\"https:\/\/www.wealthfront.com\/blog\/why-is-wealthfront-cash-account-apy-so-high\/\">history of passing along a large proportion of past rate increases<\/a> and of lowering their APY at a pace in line with decreases in the fed funds rate. Some institutions will be slow to match increases in the fed funds rate and cut rates much faster as the fed funds rate falls\u2014we think they do this because it\u2019s good for their bottom line and they feel clients are unlikely to move their deposits elsewhere. But at Wealthfront, we navigate relationships with our partner banks so you can benefit from a competitive APY on your Cash Account deposits whether rates are going up or down.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What to do with your extra cash when interest rates decrease<\/h2>\n\n\n\n<p>Maybe you have extra cash left over after accounting for your regular expenses, bills, and emergencies but you aren\u2019t ready to invest it for the long term or take on much risk (perhaps because you have it earmarked for an important future expense).&nbsp; If that sounds like you, you might consider investing that extra cash in a portfolio of US Treasuries like Wealthfront\u2019s <a href=\"https:\/\/www.wealthfront.com\/automated-bond-ladder\">Automated Bond Ladder<\/a>\u2014particularly if you expect interest rates to fall further. Our Automated Bond Ladder helps you take advantage of current yields with very little risk to your principal because US Treasuries are backed by the full faith and credit of the US government. And because interest from Treasuries is exempt from state and local income taxes, you can keep more of what you earn than you would with most savings accounts and CDs. To understand how much you personally could benefit from the tax treatment of Treasuries, <a href=\"https:\/\/www.wealthfront.com\/automated-bond-ladder#tax-equivalent-yield\">enter your details into our calculator<\/a>.<\/p>\n\n\n\n<p>Automated Bond Ladders can be especially appealing if you expect interest rates to continue falling. That\u2019s because the interest rate you earn on a bond is determined at the time the bond is purchased\u2014so even if interest rates fall and new bonds have lower interest rates, you\u2019ll keep earning the original yield on bonds you already own until maturity (assuming you don\u2019t sell). This is why people sometimes say bonds allow you to \u201clock in\u201d current interest rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What to do with your long-term savings when interest rates decrease<\/h2>\n\n\n\n<p>When it comes to your long-term savings (which we define as savings you don\u2019t plan to spend for at least three to five years), changes in interest rates shouldn\u2019t necessarily affect your strategy. <a href=\"https:\/\/www.wealthfront.com\/blog\/invest-when-rates-rise\/\">History shows<\/a> that changing your investment strategy because interest rates are above or below a certain threshold is unlikely to work out in your favor.&nbsp;<\/p>\n\n\n\n<p>Instead, we suggest sticking with a <a href=\"https:\/\/www.wealthfront.com\/blog\/what-is-diversification\/\">diversified<\/a> portfolio of low-cost index funds that is appropriate for your personal risk tolerance (like what you get with Wealthfront\u2019s <a href=\"https:\/\/www.wealthfront.com\/investing\">Automated Investing Account<\/a>) and taking advantage of <a href=\"https:\/\/www.wealthfront.com\/tax-loss-harvesting\">tax-loss harvesting<\/a> (which Wealthfront automates and offers at no extra cost).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key takeaways<\/h2>\n\n\n\n<p>When interest rates change, it\u2019s normal to wonder if you should change the way you approach your finances. To make the most of your money when interest rates decrease, we think you should do the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>For your short-term savings: <\/strong>Make sure you\u2019re not holding too much cash, and if you are, consider investing the excess. Ensure you\u2019re keeping your cash with an institution you trust to pay you a competitive APY in all interest rate environments. (We suggest the <a href=\"https:\/\/www.wealthfront.com\/cash\">Wealthfront Cash Account<\/a>, which currently has a 3.30% APY.)<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>For your extra cash:<\/strong> For extra cash that you aren\u2019t ready to invest for the long term, you might consider US Treasuries. <a href=\"https:\/\/www.wealthfront.com\/blog\/introducing-automated-bond-ladder\/\">Wealthfront\u2019s Automated Bond Ladder<\/a> makes it easy to benefit from Treasuries\u2019 higher yields, and can also help you \u201clock in\u201d current interest rates if you expect rates to fall further.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>For your long-term savings: <\/strong>Stay the course. We suggest keeping your long-term savings in a diversified portfolio of low-cost index funds like a <a href=\"https:\/\/www.wealthfront.com\/investing\">Wealthfront Automated Investing Account<\/a>. Avoid the temptation to modify your long-term investment strategy based on interest rate changes.<\/li>\n<\/ul>\n\n\n\n<p>A final note: When the federal fund rate decreases, it\u2019s true that you\u2019ll probably earn less interest on your cash. But there\u2019s a silver lining to lower rates: Borrowing should get less expensive, too. This can be good news if you\u2019ve been thinking about taking out a mortgage (although 30-year fixed-rate mortgages are more closely linked to 10-year Treasuries), and it\u2019s good news if you decide to borrow against your taxable Automated Investing Account with a <a href=\"https:\/\/www.wealthfront.com\/portfolio-line-of-credit\">Wealthfront Portfolio Line of Credit<\/a> (which you can use to borrow up to 30% of the value of your taxable Automated Investing Account with no credit check, no application fee, and no repayment schedule).<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently, the Federal Reserve lowered the target range for the federal funds rate. This decision affects most consumer interest rates, so it\u2019s normal to wonder what this change might mean for you. In this post, we\u2019ll explain what interest rate decreases mean for your money and how you can make the most of your savings [&hellip;]<\/p>\n","protected":false},"author":10000,"featured_media":17406,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282,2390],"tags":[],"coauthors":[1270],"class_list":["post-17403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","category-saving"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How To Make the Most of Your Money When Interest Rates Decrease<\/title>\n<meta name=\"description\" content=\"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How To Make the Most of Your Money When Interest Rates Decrease\" \/>\n<meta property=\"og:description\" content=\"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/\" \/>\n<meta property=\"og:site_name\" content=\"Wealthfront Blog\" \/>\n<meta property=\"article:published_time\" content=\"2024-09-27T15:01:55+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-08-27T18:10:58+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"437\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Alex Michalka, Ph.D\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:site\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Alex Michalka, Ph.D\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/\",\"url\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/\",\"name\":\"How To Make the Most of Your Money When Interest Rates Decrease\",\"isPartOf\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png\",\"datePublished\":\"2024-09-27T15:01:55+00:00\",\"dateModified\":\"2025-08-27T18:10:58+00:00\",\"author\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/dab26849baacffef502035f907045563\"},\"description\":\"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.\",\"breadcrumb\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage\",\"url\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png\",\"contentUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png\",\"width\":1200,\"height\":437},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/canary.kcprod.info/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"How To Make the Most of Your Money When Interest Rates Decrease\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\",\"url\":\"https:\/\/canary.kcprod.info/blog\/\",\"name\":\"Wealthfront Blog\",\"description\":\"Personal Finance &amp; Investing Insights\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/dab26849baacffef502035f907045563\",\"name\":\"Elizabeth Rowe\",\"url\":\"https:\/\/canary.kcprod.info/blog\/author\/elizabethrowe\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How To Make the Most of Your Money When Interest Rates Decrease","description":"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/","og_locale":"en_US","og_type":"article","og_title":"How To Make the Most of Your Money When Interest Rates Decrease","og_description":"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.","og_url":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/","og_site_name":"Wealthfront Blog","article_published_time":"2024-09-27T15:01:55+00:00","article_modified_time":"2025-08-27T18:10:58+00:00","og_image":[{"width":1200,"height":437,"url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png","type":"image\/png"}],"author":"Alex Michalka, Ph.D","twitter_card":"summary_large_image","twitter_creator":"@Wealthfront","twitter_site":"@Wealthfront","twitter_misc":{"Written by":"Alex Michalka, Ph.D","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/","url":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/","name":"How To Make the Most of Your Money When Interest Rates Decrease","isPartOf":{"@id":"https:\/\/canary.kcprod.info/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage"},"image":{"@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage"},"thumbnailUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png","datePublished":"2024-09-27T15:01:55+00:00","dateModified":"2025-08-27T18:10:58+00:00","author":{"@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/dab26849baacffef502035f907045563"},"description":"Here\u2019s a primer on how to think about your short-term, near-term, and long-term savings when interest rates go down.","breadcrumb":{"@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#primaryimage","url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png","contentUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2024\/09\/makethemostofyourmoney-blogheader.png","width":1200,"height":437},{"@type":"BreadcrumbList","@id":"https:\/\/canary.kcprod.info/blog\/money-when-interest-rates-decrease\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/canary.kcprod.info/blog\/"},{"@type":"ListItem","position":2,"name":"How To Make the Most of Your Money When Interest Rates Decrease"}]},{"@type":"WebSite","@id":"https:\/\/canary.kcprod.info/blog\/#website","url":"https:\/\/canary.kcprod.info/blog\/","name":"Wealthfront Blog","description":"Personal Finance &amp; Investing Insights","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/dab26849baacffef502035f907045563","name":"Elizabeth Rowe","url":"https:\/\/canary.kcprod.info/blog\/author\/elizabethrowe\/"}]}},"_links":{"self":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/17403","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/users\/10000"}],"replies":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/comments?post=17403"}],"version-history":[{"count":5,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/17403\/revisions"}],"predecessor-version":[{"id":17779,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/17403\/revisions\/17779"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media\/17406"}],"wp:attachment":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media?parent=17403"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/categories?post=17403"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/tags?post=17403"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/coauthors?post=17403"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}