Inflation continues to take significant bites out of household budgets. July inflation sits at 2.7%, the same as June's.
Food prices remain expensive, as beef prices have hit an all-time high, per Newsweek. Cumulative inflation shows the real impact consumers continue to face. Bankrate found prices are more than 24% higher than they were in February 2020.
If you're feeling inflation's squeeze on your finances, you're far from alone. Thankfully, there are ways of cushioning your finances against inflation, and one of the best ways to achieve this is by placing your money in high-yield savings accounts.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
Do savings accounts really outpace inflation?
If you open a savings account at a brick-and-mortar bank, chances are you're going to be disappointed. Traditional savings accounts offer a 0.6% APY on average, making it far below inflation's 2.7% rate.
However, a high-yield savings account offers much healthier returns. Some of our top options, such as this one from Newtek Bank, give you a return of 4.35%, well above the inflation rate.
Another perk is that many high-yield savings accounts come with low deposit requirements and no monthly fees. This helps you keep more of your money, which is integral given inflation's impact.
How much can I earn with a high-yield savings account?
Let's take our top pick Newtek Bank, that earns 4.35% APY. Here's how much you would earn in one year for opening the account today:
- $10,000 deposit: $435 in interest
- $25,000 deposit: $1,087.50 in interest
- $50,000 deposit: $2,175 in interest
- $100,000 deposit: $4,350 in interest
As you can see, this approach could help you earn significant gains effortlessly. This calculation assumes there will be no rate cuts in the next year from the Federal Reserve.
While that's unlikely, given the weak job numbers, inflation could prompt the Fed to continue its wait-and-see approach. This is important because high-yield savings accounts come with variable interest rates, meaning that if the Fed cuts rates, it will also drop your rate of return.
What savings alternatives should I consider?
If you're worried about rate cuts eating into earnings, another approach is to open a certificate of deposit. Unlike HYSAs, CDs feature fixed interest rates.
It means if you lock in your rate now and the Fed cuts them later this month, it won't impact you since you have your rate locked in.
You can shop quickly for the best CD rates, using this tool, powered by Bankrate:
There are a few things to keep in mind with a CD. First, many come with terms that won't allow you to withdraw your money until it reaches its maturity date. If you need cash before that time, your penalties could be months of earned interest, negating its benefit.
You can’t add to your balance the way you would with a high-yield savings account, so CDs are best suited for a lump sum you won’t need for awhile — letting you lock it into a risk-free vehicle that outpaces inflation.
Another option is a money market account. These are better-suited for established savers, as many accounts require a minimum balance of $1,000. In many ways, these accounts offer the best perks of checking, in that you can access your money anytime you want with a debit card.
Moreover, you'll gain all the perks of a savings account, including returns as high as 4.35%. This will also allow you to earn more money than inflation takes. However, as with a high-yield savings account, money market accounts come with variable interest rates. If the Fed cuts rates sometime soon, it could lower your returns.
If you're on the fence about savings options, this table can help:
Savings vehicle | Cash access | Minimum balance requirement? | Best for? |
|---|---|---|---|
High-yield savings account | Anytime you need it | Most online accounts don't have balance requirements | Savers looking to build an emergency fund or have cash access |
CDs | When your term ends, outside of no-penalty CDs | At least $500 | Established savers looking to shield money from rate cuts/inflation |
Money market accounts | Anytime you need it, though there might be restrictions on how often you can access it | At least $1,000 | Established savers looking for quick cash access |
Overall, there are several ways you can save money and stay ahead of inflation. High-yield savings accounts are the easiest, as they come with the fewest restrictions and only take a few minutes to set up.
Best of all, with rates as high as 4.35%, you'll earn a rate outpacing inflation, even if the Fed cuts rates and savings APYs drop. Therefore, if you're feeling inflation's squeeze, the right savings accounts can lessen its impact.
Related content
-
Tariffs, Inflation, Uncertainty, Oh My: How to Feel Less Stressed About Finances Now, ReallyTariffs, high prices and an uncertain economy getting you down? These steps can help.
-
IRS Updates Capital Gains Tax Thresholds for 2026: Here’s What’s NewCapital Gains The IRS has increased the capital gains tax income thresholds for 2026. You'll need this information to help minimize your tax burden.
-
Tariffs, Inflation, Uncertainty, Oh My: How to Feel Less Stressed About Finances Now
Tariffs, high prices and an uncertain economy getting you down? These steps can help.
-
Three Veterans Charities to Support As Charitable Season StartsIf you're looking for a worthwhile cause to support for Veterans Day and beyond, consider these three highly rated charities that support veterans and their families.
-
A Nightmare for Parents: How to Navigate the Legal Boundaries of Tenant Rights During a Family CrisisThis family's story illustrates how important it is to get help sooner rather than later and highlights the complexities of tenant rights and legal protections.
-
I Need to Free Up $1,000 in My Monthly Budget, and I've Already Given Up Starbucks and Dining Out. What Else Can I Do?Here are some creative ways to save up to $1,000 a month, even if you feel like you've already made all of the obvious cuts.
-
Eight Steps to Help Get You Through the Open Enrollment Jungle at WorkWondering how to survive open enrollment this year? Arm yourself with these tools to cut through the process and get the best workplace benefits for you.
-
What You Learn Becoming Your Mother's Financial CaregiverWriter and certified financial planner Beth Pinsker talks to Kiplinger about caring for her mother and her new book.
-
I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?We asked a college savings professional and a financial planning expert for their advice.
-
Seven Moves for High-Net-Worth People to Make Before End of 2025, From a Financial PlannerIt's time to focus on how they can potentially reduce their taxes, align their finances with family goals and build their financial confidence for the new year.
