When the Federal Reserve raises interest rates, most headlines focus on the negatives—higher borrowing costs, slower economic growth, or stock market volatility. But rate hikes also create opportunities. If you’re prepared and strategic, you can actually benefit when interest rates go up.
Here are five ways to turn rising rates into financial advantage.
1. Take Advantage of High-Yield Savings Accounts & CDs
Rising rates mean banks and credit unions often increase yields on:
- High-yield savings accounts
- Certificates of deposit (CDs)
- Money market accounts
If you’re sitting on cash, now’s the time to shop for better interest. Locking in a higher CD rate can provide safe, guaranteed returns—something that’s been harder to come by in recent years.
2. Buy I Bonds or Treasury Securities
U.S. government bonds tend to offer better returns during rate hikes. Consider:
- Series I Bonds, which adjust with inflation
- Treasury bills (T-bills) and notes, now offering yields above bank accounts
- Laddering strategies to manage reinvestment risk
These are low-risk options that can beat savings accounts in a rising-rate environment.
3. Consider Dividend Stocks & Financial Sector Funds
While some growth stocks suffer in high-rate environments, others shine:
- Banks and insurance companies often benefit from wider margins
- Dividend-paying stocks can offer income and stability
- Look for companies with low debt and strong cash flow
Rate hikes can reshuffle market winners—adjust your strategy accordingly.
4. Negotiate Better Returns on Annuities or Fixed Products
If you’re near or in retirement, now may be a good time to review:
- Fixed annuity rates
- Structured notes or guaranteed income products
- Fixed-index annuities (if appropriate for your risk profile)
Higher rates give insurers more flexibility—which can lead to better terms for you.
5. Refinance Variable-Rate Debt Into Fixed Terms (While You Can)
This one is about preventing losses that eat into your financial growth:
- Refinance adjustable-rate mortgages
- Lock in fixed student or personal loan rates
- Avoid high-interest credit card debt wherever possible
The earlier you make the switch, the more interest you save—and the more cash you free up to invest.
Want to Make Rate Hikes Work for You?
At Diligent Financial Strategies, we help you spot opportunities in any economic cycle. Whether rates are rising or falling, there’s always a smart move to be made. Let’s talk about how to adjust your financial strategy to work with the market—not against it.