Small savers in US scramble for interest $$$

* A middle-aged northern Virginia couple -- disgusted with soaring inflation now hitting upwards of 18 percent annually -- recently yanked $5,000 from their low-paying passbook savings account.

Then, they quickly tucked the savings dollars into a new "loophole" certificate of deposit at their savings and loan that will enable them to earn a tidy 14 percent interest over the course of a year.

* In Washington, D.C., a young professional couple just pulled several thousand dollars from savings and put it into Government Investors Trust, a relatively new money market mutual fund.

Despite "credit curbs" on mutual funds announced by the Carter administration last week, the couple will still earn only about 2 percent less than current money market rates. As of this writing that means a hefty 12.60 percent.

And that, the couple notes, is still twice the amount that can be earned on most conventional savings plans.

The quick action of the two Washington-area couples is hardly an exception these days as more and more Americans -- confronted with soaring prices on one hand and low-paying savings accounts on the other hand -- are scrambling to take advantage of the best possible ways of protecting their cash assets.

"Because of what the government has done," argues Alfred Johnson, vice-president and chief economist of the Investment Company Institute, there are "not all that many alternatives" for the typical small saver to consider in protecting his or her money.

What the government has done, explain economists, is, in effect, to hedge in the small saver -- without really trimming the ability of well-heeled investors to get maximum yields on their assets.

Thanks to federal regulation Q, a statute little known to most Americans, there is an automatic "interest rate ceiling" on passbook savings accounts. For savings and loans, the limit is 5.50 percent on savings.

Federal bank regulators recently imposed a flat 12 percent ceiling on the interest rate permitted on 2 1/2 year certificates of deposit (CDs) issued by banks that can be taken out at many institutions for as little as $100.

Last week the government again yanked high rates downward for thousands more small savers by requiring mutual funds to set aside 15 percent of all new fund investments in a noninterest-bearing account. President Carter argued that he was taking such drastic action to prevent spiraling inflation. But one immediate effect, argue many economists, is to thwart small savings from earning the highest possible rates.

Large savers, by contrast, can directly buy US government issues where rates are, in effect, "wide open" and determined by the marketplace.

The government's latest consumer price index, released March 25, showed prices during February soaring upward at 1.4 percent. That is roughly the same increase as during January -- and registers out at an annual rate of 18 percent.

But that means that investors with money to set aside in government issues also earn higher and higher rates. US government 91- day Treasury bills, for example, which sell for $10,000 or more, averaged 16.532 on March 24, up from 15 .053 percent a week earlier.

But all is not lost for small savers.

"There are still a number of good alternative ways to invest modest amounts of money," argues Norman Schrott, manager of the Alexandria, Va., offices of A. G. Edwards & Sons, a brokerage house.

Among the most frequently noted alternatives:

1. Money market funds. Despite new federal restrictions, the funds are still expected to offer yields ranging from one to several percentage points below the going money market rates. In fact, financial analysts believe that some new "clone funds" now being set up as exact duplicates of existing funds may ironically start off paying yields even higher than on existing funds.

The reason? Lower management costs -- hence, higher yields for investors.

2. Bank "loophole" certificates of deposit. At Government Services Savings and Loan in Maryland, for example, an investor with only $5,000 to invest can take out a "$10,000" certificate of deposit. How?The customer puts in the $5, 000. The S & L lends another $5,000 to bring the amount to $10,000. The total interest on the loan, leaving $700 for the saver. That works out to an annual yield of roughly 14.837 percent on the $5,000 (based on current yields).

3. Some state insured S & L's are even offering passbook accounts paying between 7 & 8 percent. Hardly up to inflation, but better than 5.5 percent, say experts.

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