The Only Savings Account You Want After the Fed Meeting
The Fed didn't cut rates at its meeting, giving savers more time to secure rates as high as 4.20% APY.
The Federal Reserve refrained from cutting rates at its meeting this week. This is due to higher gas and energy prices.
With the war in Iran resolved, gas prices should come down somewhat. But, as David Payne of The Kiplinger Letter notes, it could be well into next year before energy prices normalize due to the damage from the conflict.
On top of this, inflation is at 4.20%. It means if you don't have a savings account earning at least this, you're losing money. I'll explain whether high-yield savings accounts are still worth it, and which one is essential right now.
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Is a high-yield savings account worth it?
Yes, a high-yield savings account remains a smart choice. In fact, it should be an essential part of any personal financial plan. Think of savings as you do investing; there are ebbs and flows.
Right now is tricky for savers. Not only are you looking at higher inflation, but most high-yield savings accounts offer rates that don't keep pace. Aside from this one option:
There are other considerations with a high-yield savings account. Chief among them is that they come with variable interest rates. If the Fed decides to cut rates again sometime in the future, if inflation cools, your savings rates can drop, too.
Another consideration is cash access. Some high-yield savings accounts don't come with ATM cards, so unless you have a checking account with the same bank, it can take one to several business days to transfer funds from your savings to your checking. By that same token, though, it also can help you think twice before making impulse purchases.
If you're interested in opening an account, you can use this Bankrate tool to explore other options:
How much can you earn with a high-yield savings account?
It depends on how long you plan to hold the money in the account and how much you want to deposit. Using our top choice, Newtek Bank, here's how much you can earn in a year with its current 4.20% APR:
- $5,000: You'll earn $214.46
- $10,000: You'll gain $428.92
- $25,000: You'll earn $1,072.30
- $50,000: You'll gain $2,144.60
Is it the best option for your savings needs? If you need quick access to your cash for a short-term purchase or if your expenses are sometimes unexpected, then yes, a high-yield savings account will be the best fit for you.
However, if you have emergency savings fully funded and don't mind tying up your money for a short time, then the best CD rates offer you better protection from Fed policies because they come with fixed interest rates. Once you lock in a rate, you'll keep it throughout your term, even if the Fed decides to cut rates again.
Just remember that CDs require you to tie up your money for the term you selected. So, if you don't want to restrict access to your cash, it's difficult to beat the flexibility a high-yield savings account offers.
Now is the time to shelter your savings from inflation
The Fed didn't cut rates at its meeting. Even with inflation higher, it's likely at its peak for now. It means you can take advantage of higher rates with Newtek Bank's savings account. And if inflation starts to cool, your money will have even more purchasing power while helping you reach your savings goals.
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