In the wake of the coronavirus pandemic, the United States has experienced interest rates near record lows. On the surface, low interest rates might sound like a bad thing for investors, but in reality, these rates should be seen as a positive — especially for young people.
Toward the end of last year, the Federal Reserve shared its latest plans to keep the economy buoyant amid the ongoing pandemic. In fact, projections show the Fed aims to keep interest rates near zero through at least 2021, and some officials signaled rates may stay remarkably low for even longer.
With ample time to capitalize on the benefits, let’s take a look at a few opportunities created by these historically-low interest rates.
Borrowing opportunities for rising professionals
The current economic climate allows rising professionals to invest in their future by borrowing money for home, education, or other purposes at lower rates. This means more young people can more readily afford to bolster their educational credentials, purchase a starter home, trade up from their current homes, or take on projects. These low rates also benefit home sellers of all ages, who are reaping benefits from greater demand for housing right now.
Business creation and entrepreneurship
Low interest rates are also creating a favorable environment for business creation and entrepreneurship. While numerous economic headwinds result from COVID-19, the uniqueness of the current situation also fosters new ideas to meet the virus’s unanticipated needs and the development of new goods and services to cater to the disruption of our regular routines. Low interest rates and available credit support those willing to take on the risk of creating new business opportunities.
Savvy investing can yield more robust returns
Younger investors can’t depend on bonds to provide sufficient investment returns when rates are low. Rising professionals should be saving at least 10% of their income for the future. Typically, an employer-provided plan is the best route — particularly when an employee can take advantage of a company match. Gearing your 401(k) or other employer plans toward long-term growth in stocks will allow a savvy investor to ride out these short-term fluctuations in the market over time.
While the current situation provides some specific opportunities, the real benefit of low rates is that they provide a level of support to the stock market that will help long-term growth over time. And, we will emerge from the pandemic economically stronger and better poised for future growth.