Hi friends I'm Laura Adams and you're listening to the Money Girl

podcast. For the past few years, interest rates have been at historic lows.

However, as the economy and housing market perks up, the tide is turning and rates are creeping back up.

As interest rates rise, there are important financial decisions that borrowers need to make.

I'll tell you how to save money even as the economy heats up.

In order to understand how interest rates affect your finances, here's some basic background about

what happens when rates rise.

You probably already know that when interest rates go up, the cost to borrow money also increases.

For instance, the monthly principal and interest payment for a 30-year $200,000 mortgage at 3.5 percent

is $898 per month.

But the same loan cost $1,013 per month

if the interest rate goes up to 4.5%.

You'll pay $115 more per month for the same house if rates rise just 1%.

Certainly, no one likes to pay more interest for a home, car or credit card than they have to.

However, the upside to rising interest rates is that banks earn more from borrowers

and can pay out more interest to savers.

That means you can earn more interest on the money you keep in savings, money market accounts,

and CDs.

Rising interest rates can also affect equity investments in a positive way.

Since corporations form the backbone of the economy, interest rates typically go up when

they're doing well. Investors have the opportunity to share in their profits

by owning stocks.

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