With New Years right around the corner, many Americans are thinking about their financial goals for the next year. And this credit crunch along with the slowly recovering economy could make the average shopper decide to save more and spend less, just to have a larger emergency fund. But is it really the best time to save? And how do these low interest rates impact you?

Interest rates are being kept artificially low by the Feds right now. And while interest rates are sure to go up soon, it’s most likely the Feds are going to raise the rates slowly out of fear of choking the recovery according to this CNN article.

So what should you do in this economy? Spend more or save for the rainy day?

Well, while it’s always good to have a decent savings account in case someone loses a job, the key is not to invest in a long term savings right now. CDs (certificates of deposit) and other savings accounts where your money is locked away for a long period of time (as in greater than 6 months) are not a good financial choice right now. Why? Because interest rates are very low, and being stuck at a low return for 5 years because you locked during a recession is never a good idea.

So after you save, what are good things to spend your money on?

Well, while low interest rates are a bad thing for long term savings, it’s a great thing for loans. Now would be the time you refinance and lock in at a lower rate for the next 30 years on a mortgage, or maybe to buy a new car. All these types of borrowing will take advantage of a low rate, and boost your credit score if you pay your bills on time.

So if you planned on refinancing, buying a new home, or upgrading your vehicle anytime in the next year or two, now would be the time to do it.

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