Many people scoff at the idea of seeking out the best savings accounts, as we have gotten used to them paying miserly returns. Millions of people across the globe leave their emergency funds or spare money in current accounts paying no interest or in old savings accounts that pay close to nothing.
However, I want to fly the flag for the growing army of switchers in so many countries who are now seeking out the best rates, as right now it can make a big difference.
While I cannot tell you whether to save or invest, as that’s a personal choice based on a number of factors, what I will say is that if you are a cautious investor, then I would certainly be considering guaranteed returns of about or over 5%, which you can find on the the best CDs, best high yield savings accounts or best money market accounts.
Before we go on, check out our tools in partnership with Bankrate below, which lets you compare CD accounts and savings accounts.
Of course, the ability to make good money switching only applies if you have penalty-free access to your cash.
Can you make thousands switching your savings?
At 5% returns, for every $1,000 you have, you are earning about $50 per year, which is not to be sniffed at when you look at recent averages. If you have $100,000, that’s another $5,000 per year, which could pay for a vacation or an upgrade to your home.
I have recently moved my savings around to take advantage of higher rates and I would encourage others to do the same as otherwise you are throwing money away. Switching can take as little as a few minutes and if that can earn you hundreds — or even thousands — more per year, I’d say that’s a few minutes well spent.
While I’ve been playing the savings merry-go-round for the past decade even in a low-interest rate environment, I accept I am an exception given I am a personal finance journalist, so this is my bread and butter, and not everyone would have taken the time to do so for far smaller gains than today.
In fact, I wouldn’t have written this sort of article a year ago with so much gusto when rates were so much lower, which reduced the incentive to switch and made savings look less attractive versus the best investments. Having done this sort of job for close to 20 years, this is the most exciting time I can remember for the savings market as we are coming out of the doldrums and into the light.
Yes, I really did put “savings” and “excitement” in the same sentence, because for us personal finance nerds it is an exciting time.
Could savings rates go even higher?
There is a chance rates could improve even further although the Federal Reserve's rate-hiking campaign to combat inflation seems to be on pause. At its most recent meeting in March, the central bank opted to keep the fed funds rate, a key overnight bank lending rate, unchanged at a target range of 5.25% to 5.5%.
While there have been 11 interest rate hikes since March 2022, this is the fifth pause in a row, leaving the Fed funds rate at its highest level in 22 years. In its accompanying statement, the Federal Reserve signaled that while its rate-hiking campaign is on pause for now, it stated that "the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." The Federal Open Market Committee (FOMC) noted that the Committee was still strongly committed to returning inflation to its 2 percent objective.
While a Fed rate pause doesn’t guarantee a taper in savings rate increases, banks tend to at least roughly follow the Fed’s trajectory, so you’d expect the rate increases to be smaller or stall.
Of course, you can’t control what the Fed does, nor what is happening in the wider economy, but you can control how hard your money is working for you to some extent, so I say it’s time to become a savvy saver.
Related Content
-
Why a 5-Year CD is Your Best Bet After the Fed MeetingWith no rate cut at the Fed meeting in January, you still have time to lock in historically high interest rates with a 5-year CD.
-
How to Cushion Your Tax Refund From InflationIf you're planning on receiving a tax refund, there are a variety of strategies you can employ to protect it from rising costs.
-
After the Fed Meeting, Seven High-Yield Savings Accounts Worth Your WhileThe Fed didn't cut interest rates during their meeting this week. These high-yield savings accounts offer attractive rates to beat continuing inflation.
-
Are You Really Prepared for a Financial Emergency?High inflation and interest rates have impeded the ability of many people to save more. How do you save more with less? We'll show you a few options.
-
Where to Store Your Cash in 2025Take a fresh look at budgeting and savings opportunities for where to store your cash this year, to ensure you leave no stone unturned.
-
Callable CDs: Was Your High-Yield CD Called Back Before It Matured?Here's what you need to know about callable CDs, which let banks redeem your CD before its official maturity date.
-
Where To Put Your Money As Interest Rates DropEarning 5% returns on your money is slowly coming to an end. Even so, there are places to put your money that still make sense.
-
The Fed Could Cut Rates Again. What Should Savers Do About CDs and High-Yield Accounts?Here's what to know about CDs and high-yield savings accounts before the Fed meets to possibly cut rates again.
