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After falling to rock bottom levels following the Great Recession of 2008, interest rates are on the rise again.The Federal Reserve raised benchmark rates in December for the fourth time in 2018, bringing them up to a target range of 2.25% to 2.5%. Observers expect those hikes to continue into the following year.

The Fed usually only raises rates by a small amount each time, so there’s little cause to worry about something overly dramatic happening. But a steady climb does affect the economy, including your debt and investments. When interest rates go up, borrowing gets more expensive.

So if you’re planning on taking out a new home mortgage loan or car loan, or refinancing an old one, you may want to keep in mind that rates are likely lower now than they will be in the near future.

And if you have a variable rate loan, you might see your interest rate start to climb. Similarly, credit card interest rates are also likely to go up, so it may make sense to to pay off any balances in full, if possible.

But what happens to your investments when interest rates rise? The answer, though complicated, is worth digging into. Knowing what to expect can help you figure out what you should be investing in and when. We break down how climbing interest rates can often affect investments such as money market accounts, stocks, bonds and commodities.

How Rising Interest Rates Impact Money Market Accounts and CDs

When benchmark interest rates climb, banks and other financial services providers tend to increase the rates they offer on high-interest savings accounts, money market accounts, and certificates of deposit (CDs). Although these rates are still unlikely to match what you’d get from investing in the stock market long term, they can make these financial products a more attractive place to park your money.

If you’re already in a high-interest non investment account, many banks will keep raising your rate without you having to do anything. If you’re not, this could be a good time to start looking around for an institution that’ll put more money in your pocket.

If you already have money in a CD, rising rates won’t do much for you until the term ends, since you’re probably locked into what you signed up for.

How Do Interest Rates Affect Bonds?

When you purchase a bond, you loan money to a company or the government for a set amount of time and receive a fixed return in exchange. When interest rates rise, bond yields—or the return you make on investing in a bond—rise as well.

With interest rates low in recent years, bond yields have been low as well, making them less appealing as an investment. As rates increase, a higher return can make bonds seem more attractive. On the other hand, when demand for bonds increases, the price of bonds can go up, too.

What to Know About the Interest Rate and Stock Market

Unlike some investments, interest rates don’t have a single, clear impact on stock performance. However, rising interest rates have often had a negative impact on the stock market historically. Since borrowing becomes more expensive, consumers may put off taking out mortgages, buying cars or purchasing major household appliances.

Similarly, because they are paying higher interest rates on existing bills, consumers have less money left over to spend on other goods and services. Reduced spending affects companies’ revenues and profits, which can have a ripple effect throughout the stock market.

Like individuals, companies too find it more expensive to borrow when interest rates rise. They may borrow less or have less money left over to invest in their business, potentially slowing growth and reducing profits, all of which can dampen stock performance. Even the psychological impact of anticipated interest rate hikes can be enough to make individuals and companies spend less, causing the market to take a hit in advance of actual increases.

When stock prices decline broadly, the primary market indexes will also go down, which can further reduce confidence in the market. The exception is banks and other companies in the financial sector, such as mortgage or insurance providers, who benefit from higher interest rates and often see a bump in stock value. That often makes those stocks more attractive during rising interest rates.

Despite these trends, there is no guarantee than any given change to interest rates will affect stocks negatively. That’s because the stock market is affected by myriad factors besides interest rates, including current events, trade policies and other economic conditions.

It’s worth remembering that selling stocks out of panic during a downturn isn’t usually a great idea. Instead, it makes sense to buy when stocks are low. Even more importantly, the best predictor of returns is the length of time that your money remains in the market, so resist the urge to pull money out.

How Do Rising Interest Rates Impact Commodities?

Interests rates usually have a more direct relationship to commodities prices than they do to the stock market. Commodities are raw materials or agricultural products, include things like steel, beef and lumber. When interest rates rise, commodities prices usually fall.

That’s because it becomes more expensive for the companies that buy commodities, such as food producers or construction firms, to stockpile them and store them for long periods. As a result, companies will buy more commodities as they need them and lower demand will fuel lower prices.

That said, don’t panic yet: There’s no guarantee if this will happen since factors like inflation also play a role.

How Investing with SoFi Invest® Can Help You Tackle Rising Interest Rates

When you open an automated account with SoFi Invest, you can invest in a bundle of Exchange-Traded Funds. Because your portfolio is diversified across thousands of assets, you have more protection against fluctuations across various types of investments due to rising interest rates then you might if you invested in just one or two stocks.

Plus, a credentialed financial advisor will rebalance your portfolio at least quarterly, so you can know your investments will stay on track with your goals and risk tolerance, even if things start to change due to climbing interest rates.

If you’re a member and have more questions about how to invest in this dynamic environment, you can access complementary financial advice as often as you like. And you can start investing with as little as $100.

Want the confidence that comes with knowing your portfolio can respond to a changing economic environment? Look into investing with SoFi today.

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The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth LLC, a registered investment advisor. SoFi Securities, LLC, member FINRA / SIPC .
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Now that you’ve graduated from college and started your career, you may have already received some student loan advice from well-meaning confidantes (or strangers, let’s be honest).

But something that worked well for a family member or friend may not work for you. With student loan payments looming, it’s wise to create a student loan repayment strategy based on your unique situation as soon as possible.

That includes understanding what type of student loans you have, what repayment options are available, and how to eliminate your debt as quickly as possible.

5 Pieces of Student Loan Advice to Help You Start Off On the Right Foot

Leaving college and entering the so-called “real world” can be overwhelming enough as it is. Knowing how you’re going to pay down your student loans can make everything else seem a little easier.

As you consider the right repayment strategy for your student loans, these tips might help. This stuff can get complicated, so of course we always recommend that you speak to a qualified financial advisor to help determine what’s best for you and your situation.

1. Know What Type of Student Loans You Have

There are two types of student loans: federal and private. The type of student loan you have can help determine what sort of repayment options are available to you and if you qualify for certain benefits, including student loan forgiveness and income-driven repayment plans. (Private lenders don’t typically offer flexible repayment options like these, so if your student loans are eligible for them they’re probably federal loans.)

If you don’t know what type of student loans you have, finding out should be easy. If you applied for student loans by filling out the Free Application for Federal Student Aid (FAFSA®), for example, you have federal loans. You can also use the National Student Loan Data System (NSLDS) to track down all of the information on your federal student loans.

If you applied with a private lender and underwent a credit check to get approved, you have private student loans. If you’re still not sure, check with your student loan servicer. You likely received an email or letter from your servicer encouraging you to open an online account. Find that message and either email or call your servicer and ask.

2. Know When Payments Start

If you haven’t already started making monthly payments, it’s a good idea to find out when they’re due and to set up your payment schedule.

In most cases, you’ll have a six-month grace period from the time you left school. Check with your servicer as soon as possible to find out exactly when your first bill is due is and how to make payments.

3. Understand Your Repayment Options

Depending on what type of student loans you have, you may have different repayment options. With federal loans, for instance, you typically start out with the default 10-year repayment plan.

To simplify things, you can consolidate your federal student loans through the Department of Education . But while this can replace several loans with one, you can end up with a higher interest rate overall.

That’s because the government takes the weighted average rates on all of your loans and rounds it up to the nearest one-eighth of a percent (0.125%).

If you can’t afford your monthly payments, however, you can apply for one of four income-driven repayment plans, including:

•  REPAYE Plan: Your monthly payments are generally 10% of your discretionary income, and your repayment term will be extended to 20 or 25 years.

•  PAYE Plan: Your monthly payments are generally 10% of your discretionary income, and your repayment term will be doubled to 20 years.

•  Income-Based Repayment (IBR) Plan: Your monthly payment will generally be 10% or 15% of your discretionary income, and your repayment term will be either 20 or 25 years.

•  Income-Contingent Repayment (ICR) Plan: Your monthly payment will be calculated as the lesser of 20% of your discretionary income or what you would pay on a 12-year repayment plan with fixed payments. Your repayment term will update to 25 years.

Anyone can apply for the REPAYE and ICR plans , but you need to demonstrate financial need to get approved for the PAYE and IBR plans.

With federal loans, you may also qualify for the Public Service Loan Forgiveness program. Through PSLF, you can qualify to have your loans forgiven after you’ve made 120 qualifying monthly payments on an income-driven repayment plan while working for an eligible employer.

Eligible employers include government organizations, tax-exempt not-for-profit organizations, and other not-for-profit organizations that provide qualifying public services.

Only Direct Loans are eligible for PSLF, so if you have a different type of federal loan —like a Federal Family Education Loan (FFEL) a Perkins Loan—you’ll need to consolidate it with a Direct Consolidation Loan.

Depending on your career choice, there may be loan forgiveness program options for you, such as through the military, schools, or hospitals.

If you have private student loans, your repayment term was determined by you and the lender when you first applied for your loans. Private student lenders typically don’t offer student loan forgiveness programs, such as SoFi.

4. Consider Refinancing Your Student Loans

Of all the student loan advice that you receive, this tip could make the biggest difference in eliminating your debt. Refinancing your student loans can save you thousands by reducing your interest rate, shortening your repayment term, or both.

Lenders like SoFi offer fixed and variable rates that can be lower than what you’re currently paying. If you qualify, SoFi will pay off your current loans with a new loan.

So, like federal loan consolidation, you can replace several loans with one. But if you qualify, you can also get a lower interest rate, which can reduce the amount of money you spend on interest over the life of your loan.

Remember, however, when you refinance your federal student loans with a private lender, you forfeit access to federal benefits like income-based repayment plans and student loan forgiveness.

5. Avoid Missing Payments and Defaulting

Whatever you do, avoid the temptation to just stop paying your student loans. You typically can’t get student loans discharged in bankruptcy like you can other debts, and defaulting on your student loans could damage your credit.

What’s more, the federal government can garnish your wages and tax refund for payment on federal loans, and private student loan companies can sue you.

In other words, repaying your student loans may not always be easy. But the alternative can be so much worse.

Finalizing Your Student Loan Repayment Strategy

After you consider these tips for paying off student loans, keep in mind that there’s no single right answer. Start by looking into federal loan consolidation, income-driven repayment, and student loan forgiveness.

But also look into refinancing your loans to see if you can save yourself both money and time. To see what your student loans could look like if you refinance with SoFi, take advantage of our easy to use student loan refinance calculator.

Regardless of how you choose to pay off your student loans, consider adding extra payments each month to pay down your debt even faster. This may require cutting back in other areas of your budget, but it can pay off in the long run.

And of course, we always recommend that you speak to a qualified financial advisor to help determine what’s best for you and your situation.

Looking for a way to make your student loans more manageable? Consider refinancing with SoFi.

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The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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If you have kids, it’s a good thing you don’t have to come up with this money up front (although it would probably help). A child costs over $245,000 for a middle-income family to raise until age 17, according to the U.S. Department of Agriculture.

If you don’t have kids, you’re part of an increasingly large group. The number of childless Americans has been steadily increasing for decades; according to the most recent census , “The share of adults living without children has climbed 19 points since 1967 to 71.3%.”

Increasingly common living situations have also made it more difficult for younger people to start families, even if they wanted to. In 2016, the number of millennials age 25 to 35 who moved back in with their parents rose to 15%, up from 12% in 2010.

If you’re part of a couple who have decided not to have children, you may be referred to in the culture as “DINKs” (dual income/no kids). DINKs are perceived to have more time to focus on personal development (and each other) and to be able to follow their passions.

However, having no children is no guarantee of being in the green, especially when it comes to retirement savings. DINKs may not have the financial burden of raising children, but that may leave them tempted to splurge on a more lavish lifestyle.

It’s also a little-known fact that many seniors are working long beyond the typical retirement age of 65. In 2016, nearly 19% of senior citizens hadn’t retired and two-thirds were working full-time (when the person has a white collar job, the situation is more likely to be voluntary).

Here are a few proactive steps to take to help keep yourself from becoming a statistic.

Saving for Retirement is Job #1

Having no children may mean that you have less to be responsible for, but don’t forget to be responsible for yourself. One way to take care of your future self now is to save for your retirement.

Determine what income you will receive in your retirement; that includes Social Security and any annuities or pensions coming your way. Subtract that from the annual living expenses you expect to have.

If you work at a full-time job, your employer may offer a 401(k) as a benefit. This is a retirement plan and employers often match any contributions you make to the fund.

It usually allows for higher contribution rates than other investment funds (in 2019, you’ll be able to contribute $19,000), and your contribution is simply deducted from your paycheck. You fund your 401(k) with pre-tax dollars, which reduces the amount of taxable income you report to the IRS each year.

If you don’t have an employer-sponsored 401(k) at work (and even if you do), consider opening an IRA. An individual retirement account is another tax advantaged fund that allows you to invest your money over time.

If certain conditions are met, taxes can be deferred until retirement, when your tax bracket likely will be lower. Money invested into an IRA might be invested in stocks, bonds, ETFs, and mutual funds.

You’re not able to cash in any of this investment until you turn 59 ½ (happy half-birthday in advance!). If you do, you have to pay a 10% penalty, which could take a big chunk out of the money you’ve worked hard to invest.

A Roth IRA is another tax advantaged option. Qualified individuals are allowed to contribute after tax income, but earnings are not taxed when you make withdrawals after age 59 ½, when certain conditions are met.

Estate Planning

This is all about tying up the loose ends after you die, making sure that the money you leave behind goes to a spouse, relative, friend, or even a charity. What’s important is that your final wishes are carried out, legally.

Most of your final wishes can be executed through a will. It’s never too early to write one, and it typically only costs a few hundred dollars to make it happen.

If you don’t have a will, that means you will die “intestate,” and your money and property might be given away for you by a judge. A will lets you appoint an executor and empowers him or her to carry out your decisions.

The executor might sell your property, make sure your final taxes are paid, and wrap up any unresolved financial issues you’ve left behind. The job of an executor carries a lot of responsibility and can also involve court time and people contesting your will. Make sure your executor is somebody you trust, and who is working in your best interests.

A will also lets you decide who gets your money and property after you’re gone (your beneficiaries). In most cases, your investments—for instance an IRA, 401(k), and life insurance—allow you to list beneficiaries as well.

Assume You May Need Elder Care

Without children, there may be fewer people around to take care of you when you’re older. That may mean planning for residence in an elder care or assisted living facility. And that includes the cost of living there, and it’s usually rather costly.

“A lot of people have this sense that it’s all going to work out (but) have never gone through the exercise of really understanding what the numbers look like,” Sally Brandon of Rebalance IRA told USA Today.

Surprisingly, only about 3% of senior citizens live in nursing homes, according to the last U.S. Census in 2010. Rather than move to a nursing home or assisted living, many seniors choose in-home care support. Hopefully you can too, but better safe (and prepared) than sorry.

Plan for the Death of a Spouse

This may be an unpleasant thing to even think about, but planning for your worst-case-scenario is a must for your future financial planning. First, you’ll want to consider solid life insurance policies. In addition to life, you may wish to consider medical and disability insurance as well, in the event that your spouse becomes ill, injured, or disabled.

Life insurance can provide your family with financial help in the event of your passing, while medical insurance can help if you are no longer able to contribute financially to your family because of a disability or injury.

Plan for Your Pets

Find an animal lover, or a lover of your particular pet, to take care of them after you’re gone. The idea is to make the transition as easy and as non-traumatic as possible for your pet, and to avoid the last resort of an animal shelter.

Naming a caretaker in your will may not necessarily obligate that person to take care of your pet. You may want to make a written agreement with the caretaker, and start a small trust for the care and feeding of your pet.

Saving For Retirement

Ready to start saving for retirement? You can open up an investment account with SoFi Invest. Or if you have an old 401(k) or IRA accounts you can roll them over into a SoFi Invest account. There are no management fees and all SoFi members have access to speak one-on-one with a SoFi financial planner.

They can help you map out a definite and clear financial plan. With SoFi Invest, you can get the navigation assistance you’ll need to stick with your financial goals.

Learn more about SoFi Invest today!

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External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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