Time Plus News

Breaking News, Latest News, World News, Headlines and Videos

Will high-yield savings rates rise after Fed rate hikes?

While all types of savings accounts benefit from rising rates, high-yield accounts particularly thrive.

Getty Images/iStockphoto

When the Federal Reserve raises interest rates, it affects borrowers, lenders, and investors—usually in a negative way. But what about conservators?

If you’re among the millions of Americans who rely on savings emergency fund, retirement nest egg or other financial goals, you are lucky people who can actually benefit from higher rates. In this article, we will explore why the savings rate may rise later The Fed’s latest rate hike and how High-yield accounts You can help capitalize on this growth.

Explore high-yield rates now to find out how much more you can earn

Will high yield savings account rates rise after the Fed raises rates?

In short: yes. Savings account rates are based on the federal funds rate, so when that rate rises, so do savings rates. That means savings accounts, CDs and other deposit products earn more.

A rate hike can also net you higher interest rates because a higher federal funds rate makes it more expensive for banks and other financial institutions to lend money. One way they try to maintain profit margins is by attracting more deposits from customers. As banks compete for customers, some offer higher rates than others. by Shop aroundyou can find Account with the highest rate And maximize your yield.

“There’s a pretty significant spread between banks when it comes to interest rates offered on savings accounts,” says Tim Melia, CFP, MBA, principal and financial planner at Embolden Financial Planning LLC. “This is a great time to compare institutions and offered rates.”

Compare savings rates today to get the biggest return on your money.

Advantages of high-yield savings accounts

While all types of savings accounts benefit from rate hikes, High-yield accounts Here is the reason why especially the improvement.

They earn 15 times more interest

High-yield savings accounts, as you might expect, offer higher yields Regular savings account. But just how high up you might be surprised.

According to FDIC data, the average interest rate on regular accounts is currently 0.39%. In contrast, high-yield savings account rates range from about 3.75% to 4.75%. It is about 10 times more. In recent months, the difference has been up to 15%.

“In today’s interest rate environment, high-yield savings accounts make a lot of sense for someone who otherwise has idle cash in a low/no-interest account,” says Jim Utsler, CFP, ChFC, CMA, wealth advisor at Henghold Capital Management, LLC. “Many high-yield savings accounts pay…significantly more than the average checking or brick-and-mortar savings account. That rate difference can equate to hundreds, if not thousands, of annual interest income growth, depending on how much money you invest. Can. Able to save it.”

They offer better terms

Much higher yields are offered by savings accounts Online Bank. These banks have lower overhead than traditional brick-and-mortar banks, which means they have lower costs and can offer better terms to their customers. For example, many online banks offer low or no maintenance fees or minimum account balances.

They are safe

Compared to more volatile financial products, such as stocks, high-yield savings accounts a safe place To keep your money. They are protected by FDIC insurance up to $250,000 per bank, per account (or NCUA insurance for the same amount for credit unions). So even if your bank fails, the government protects your money up to that amount.

Also, unlike products like stocks, you don’t lose your initial deposit in a savings account when market conditions change. You might not earn as much if interest rates drop, but your initial balance won’t be affected.

Ready to get a high-yield savings account? Start here!

Bottom line

The high-yield account is one of the easiest Ways to increase your savings, and the latest Fed rate hike makes them even more valuable. That’s just one reason you should Switch to a high-yield account Today.

“Now that rates are up, there are more benefits to taking this step,” says Jim White, CFP, EA, founder of Great Oak Wealth Management. “If you’re currently getting 0.5%, 1% or even 1.25% from your current savings account, as opposed to 4%+ from high-yield savings, the difference over time will be substantial.”

MoneyWatch: Managing Your Money

more and more

Source link