The Federal Reserve met this week and refrained from changing the federal funds rate, citing an increased uncertainty on the economic outlook as reason for the wait and see approach.
After ending 2024 with three consecutive rate cuts, the Fed has refrained from making rate cuts for the first four meetings of 2025. It also gives savers some breathing room...at least for now.
However, that doesn't negate the fact that inflation continues to place stress on budgets. Core inflation is around 2.8%. While lower than anticipated, the recent CPI report didn't include how tariffs will influence the data.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Bankrate's chief financial analyst Greg McBride remarks, "The Fed statement noted the risks of both higher unemployment and higher inflation have increased. How the data unfold in the coming months will dictate the Fed’s path. It’s going to be an interesting summer.”
How to cushion inflation
While you might not be able to withstand inflation's impacts directly, there are ways to cushion your money to reduce its effect. And one of the best options is high-yield savings accounts. McBride adds, "Savers will continue to enjoy returns that outpace inflation if the money is parked in the most competitive savings accounts."
A high-yield savings account allows you to earn a high rate of return. Unlike certificates of deposit, you can add money to these savings accounts at any time.
And you can withdraw or transfer those funds when you need them. Just be careful of any minimum balance requirements that might apply or else your monthly fee might offset the interest earned.
Using this tool from Bankrate, you can see how rates currently measure up:
There are other considerations with a high-yield savings account. Chief among them is they come with variable interest rates. If the Fed decides to cut rates in the future, your savings rates can drop too.
In the meantime, if you're looking for a flexible way to save money, it's hard to beat the rates offered. Here are some of the top high-yield savings accounts we recommend:
Account | APY | Min. opening deposit |
|---|---|---|
4.35% | $0 | |
4.30% | $100 | |
4.30% | $500 | |
4.25% | $0 | |
4.25% | $100 | |
4.25% | $1,000 | |
4.25% | $5,000 |
Use budgeting apps to meet savings goals
Sometimes, a fresh perspective on where your money goes helps you identify spending patterns, and with them, opportunities for more savings. Some of our favorite budgeting apps are easy to use, affordable and can help you meet your savings goals.
One of the easiest to use is Quicken's Simplifi.
The bottom line
The Fed held steady and refrained from cutting rates at their current meeting. This is great news for savers, as it means you can still secure a higher rate of return.
Against inflation, high-yield savings accounts can help, as they offer a higher rate of return that cushions your finances some from it.
Related content
-
Dow Rips 846 Points to New All-Time High: Stock Market TodayFed Chair Jerome Powell seems ready to cut interest rates in the fall but will still rely on incoming economic data about inflation and employment.
-
Test Out Your Retirement Before You Call It QuitsIt's not easy to take a retirement back. Before you make the plunge, test the waters with these tips.
-
Sling TV Launches Select Plan With Lower Price PointA lean new $19.99 bundle combines top news, sports and entertainment channels with 4K options and local feeds.
-
Are Rideshare Drivers on the Road to Financial Ruin?Being a rideshare driver can be a great way to meet people and make money. But overlooking this one thing could cost you thousands.
-
Spirit Airlines' Future in Doubt: What This Means for Budget TravelSpirit Airlines says it may not survive another year. Here's how its potential collapse could affect low-cost flights and what it means for travelers seeking affordable airfare.
-
Bonds Pay in Good and Bad TimesBonds can act as a financial safety net through good times and bad. But different bonds carry different returns and risks, so do your homework before investing.
-
TSA Is Making Security Screening Even Faster for CLEAR+ MembersNew eGates promise to make identity verification a six second process for CLEAR+ members.
-
How Much the Best Travel Credit Cards Can Save You on a $10,000 TripTravel credit cards can help you save on your trips while offering elevated perks.
-
Protect Your Retirement From Extreme Weather EventsA rising tide of storms, fires, and heat is impacting retirees. Here's what you can do about it.
-
Board Service in Retirement: The Best Time to Join a Board Is Before You RetireMany senior executives wait until retirement to take a seat on a corporate board. But making this career move early is a win-win for you and your current organization.
