Two years ago, short-term interest rates were in the 1% range, and it mattered little whether you stashed cash in the corner bank or a piggy bank. Sixteen rate hikes later, courtesy of the Federal Reserve Board, savings returns are high enough to matter to savers such as Karen Denu, a 37-year-old federal employee from Alexandria, Va. She has a six-month certificate of deposit due in September at Citibank that pays 4.7% and just opened an online savings account there at 4.75%.

What a difference a couple of years make. In June 2004, when the Fed began raising rates to fight inflation, one-year CDs averaged 1.1% nationwide. Now, they're at 3.7%, a five-year high. Yields on money-market mutual funds are up from a record low of 0.5% in March 2004 to 4.3%.

Savings bonds are another excellent deal. In its May semiannual rate adjustment, the Treasury reduced the rate from 6.73% to 2.41% for its inflation-adjusted I-bonds. But all of the cut was in the part of the I-bond rate that's adjusted every six months to track inflation. The component that's fixed for the life of the bond rose from 1% to 1.4%, so there's a higher floor. (For more on I-bonds, see The Case for I-Bonds.) Fixed-rate EE savings bonds jumped a half-point to 3.7%. So if you own older savings bonds, you may benefit by selling after the required one-year holding period and reinvesting -- even if you forfeit three months of interest for selling before five years.

But there's no reason to rush. Savings-bond yields lag the action in other rates, so the best time to buy savings bonds is after yields peak on the alternatives. We think most rates are headed higher, even if the Fed pauses for a while. Later this year, watch for average one-year CDs to reach 4% to 4.2% and five-year CDs to make it to 5%. That will be the time to think about locking in yields. You can hedge your bets by setting up a CD ladder. Start by buying CDs that mature in three, six, nine and 12 months. As each matures, replace it with longer deposits.

And don't settle for average yields. Go online for the best rates, such as a money-market account at Corus Bank that yields 4.84%. Or earn 5.35% on a one-year CD with a minimum of $500 at Ascencia Bank. Citibank's online savings account, at 4.75%, is among the most generous of that kind. Credit unions are easy to join, and high yields make them worth it. For example, GTE Federal Credit Union in Tampa has a one-year CD yielding 5.4%. That's enough to crack open your piggy bank.

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