The Federal Reserve met this week and refrained from changing the federal funds rate. After ending 2024 with three consecutive rate cuts, savers can take a deep breath... at least for now.
However, that doesn't negate the fact that inflation continues to place stress on budgets. Core inflation is around 3.2%, with increasing costs in shelter, fuel, energy and food the chief drivers for the rise.
Bankrate's chief financial analyst Greg McBride remarks, "The Federal Reserve left interest rates unchanged and until inflation shows broad and sustained improvement, we’re unlikely to see any rate cuts."
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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 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.
That said, there's no guarantee they'll cut rates, only a consideration. And 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 |
|---|---|---|
| Newtek Bank | 4.55% | $0 |
| BrioDirect | 4.55% | $5,000 |
| Poppy Bank | 4.50% | $0 |
| Jenius Bank | 4.50% | $0 |
| Popular Direct | 4.50% | $100 |
| My Banking Direct | 4.45% | $500 |
| Bread Savings | 4.40% | $100 |
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. Along with tracking your expenses, the app can anticipate future cash flow, giving you a proactive perspective on your finances. This allows you to adjust your spending to meet your saving goals.
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 inflation.
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