Although inflation appears to be easing slightly, it still remains high. According to the latest from the Federal Reserve Consumer Price Index ReportConsumer prices rose at an annual rate of 4.9% — far short of the Fed’s 2% target rate.
Inflation has negative economic effects. This raises the cost of living, reduces the purchasing power of the dollar, and makes borrowing more expensive. However, this could be great news for savers.
Smart savers are always looking for the best return on their deposits, and interest rates play an important role in determining how much they earn. When inflation is high, the Fed raises interest rates in an attempt to slow the economy. This, in turn, increases the savings rate.
See how much you could earn by checking the current savings rate here.
What the latest inflation numbers mean for your savings
When the Fed raises interest rates — as it does during high inflation — it costs banks more to lend money. As a result, they raise their savings rates to attract more customers, whose deposits can help improve the bank’s cash flow. So, when interest rates are high, savers stand to earn more interest on their deposits.
It is important to earn the best returns by opening an account that takes advantage of inflation-related interest rate increases. A High Yield Savings Account Offers significantly higher yields than regular savings accounts — think 4.5% (or higher) versus 0.39%. On a balance of $5,000, that’s a difference of $225 (or more) in interest per year versus $19.50. Compound that for a few years, and the difference really starts to add up.
whether you Build an emergency fund Or by putting money aside for a specific goal, a high-yield savings account helps you Money grows fast — especially in an inflationary environment.
With a high-yield account, “your savings won’t sit on the sidelines,” says Kristen Beckstead, CFP, ChFC, vice president and financial planner at First Horizon Advisors. “It will make a real return to the game while being safe and accessible.”
Explore current savings rates online today.
Other Benefits of High-Yield Savings Accounts
No matter the economy, high yield savings accounts Openable. In addition to high yields, they offer:
Protection: If you deposit at an FDIC-insured bank or NCUA-insured credit union, Your savings are safe Up to $250,000 per account per institution. If the bank fails, your money is protected by the federal government. Additionally, your earnings may decrease if interest rates drop, while your initial balance remains the same (assuming you don’t make any withdrawals).Easy access to your money: “Flexibility is another benefit of high-yield savings accounts,” says Tracy Cowley, CFA at VEM Medical. “For emergency funds or short-term savings goals, it’s ideal because you can access your funds whenever you need them. Some high-yield savings accounts offer ATM access, online banking and mobile apps to make saving easier.” This contrasts with the deposit product CDwhich locks up your funds for a predetermined period of time.Low or no fees: Many high yields are offered by savings accounts Online Bank, which have lower overhead than traditional banks with physical locations This allows them to offer low or no minimum balance or deposit requirements (meaning little or no fees for you to worry about).
When interest rates rise to combat inflation, savings account rates also rise. That means you can earn more from your savings at other times. And by opening a high-yield savings account, you can capitalize on these higher rates. To find the best account for you, take your time Compare your optionskeep This is an important consideration in mind
Inflation is rarely good news for consumers, so why not maximize your savings and take advantage of some of its special benefits?
MoneyWatch: Managing Your Money
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