Consumers rethinking savings, investments

BALTIMORE (Map, News) - Energy costs surged 23 percent, gas inflated 19 percent and food prices rose 4 percent in the Baltimore-Washington area in the past year.

With these and other costs accelerating and showing no signs of slowing down, do consumers have enough cash and courage to save and invest?

“For many households, they’d say, ‘I’d love to save, and if I could do it I would, but I’ve got this electric bill, gas is going through the roof, and you tell me what I can give up so I can save,” said Anirban Basu, a local economist and chairman and chief executive officer of the Baltimore-based Sage Policy Group.

“They don’t have that much to give up, but they’re willing to give up the savings account,” Basu said.

Some consumers are choosing short-term flexibility over long-term investment options.

Provident has seen increases in customer savings balances as well as new account openings in recent months, as people move their funds from fixed, long-term certificates of deposit to traditional savings accounts, said Steve Heine, executive vice president of consumer and business banking for Baltimore-based Provident Bank.

“People want to have easier access to their money, because they know gas and grocery prices are going up,” Heine said. “Interest rates have really come down, so there’s less incentive to tie up that money in a CD.”

At M&T Bank, customers are looking for value and security in their investments, said Noel Carroll, regional sales manager for M&T Bank’s Greater Baltimore area. M&T’s revenue from investment funds has doubled in the past year, Carroll said.

“Definitely, we’re seeing a flight to quality,” Carroll said. “Customers want to see better value for their money, and that’s a direct result of the economy.”

For people who have a large amount of their savings in CDs, there could be some concerns because necessary expenses are increasing, Carroll said.

“Pay yourself first when it comes to savings,” said Heine, who recommends people have enough savings to cover two months to six months of living expenses. “If you do it on a regular basis, you’re better prepared for times like this when gas and groceries cost what they do now.”

Staff Writer Aaron Cahall contributed to this article.

acannarsa@baltimoreexaminer.com

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