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Saving money is an important part of a solid financial plan — and that’s true for nearly everyone. After all, there’s no way to tell when the next emergency might happen, and when it does, you may need to dip into your savings account to ease the financial burden it causes.
Then again, saving money is challenging. You have to be disciplined enough to set money aside, and moneyneeds to earn a return that outpaces inflationor it loses buying power. One way to solve this problem is to put your money in a high-yield savings account.
And, many of today’s best high-yield savings accounts offer rates well over the current inflation rate — but there are even more reasons to consider opening one this month.
Compare leading high-yield savings account options today.
Why you should open a high-yield savings account this February
At an average rate of 0.47%, traditional savings accounts generally don’t keep up with inflation. So, if your emergency savingsare currently held in a regular savings account, it may be time to make a change to a high-yield savings account. Here are three reasons you should open one this February:
Rates are impressive
The annual percentage yields (APYs) on leading high-yield savings accounts are currently between 4.35% and 5.25%. The current inflation rate in the U.S. is 3.4%,so you would earn an inflation-adjusted return of between 0.95% and 1.85% by depositing money into one of these accounts.
“The market for savings accounts is becoming increasingly competitive, propelled by the efficiency and cost savings associated with online banking,” says Gary Zimmerman, CEO and founder of MaxMyInterest. “Consequently, depositors stand to benefit from shopping for the best rates to maximize their savings.”
Take advantage of today’s impressive high-yield savings rates now.
Inflation is still high
The Federal Reserve’s federal funds rate is largely dependent on inflation. When inflation is above the Fed’s 2% target rate, the central bank usually increases interest rates to hamper consumer spending. When the economy is weak, though, the central bank often reduces interest rates in an attempt to spur consumer spending.
While inflation has slowed in recent months, it’s still higher than the Fed would like. And, in turn, the Fed has opted to pause rate hikes four consecutive times, keeping rates at a 22-year high. As such, many high-yield savings accounts are likely to continue offering impressive returns for now, making it a great time to consider opening one.
The rate environment could change
But while high-yield savings account rates are high on average right now, it’s important to note that the interest rate environment could change. And, because high-yield savings account rates are variable, those rates would likely fluctuate in tandem.
And, while the overall rate environment is currently high, that may change at some point in 2024. If that happens, the rates being offered on high-yield savings accounts would decline, too.
By opening your account now, though, you’ll earn at today’s high rates and will continue to until the overall rate environment changes.
Other reasons to open a high-yield savings account
There are a few other reasons to consider opening a high-yield savings account as well, including:
Safety: High-yield savings accounts typically come with FDIC or NCUA insurance on balances up to $250,000 per account, per depositor. So,your money is safein this type of account up to the $250,000 limit. Accessibility: It’s important to have access to your emergency savings when you need it. And with a high-yield savings account, you can typically withdraw money up to six times per month without paying a fee.Fees: Many of the best high-yield savings account options are fee-free. So, if you choose one of these accounts, you won’t have to worry about unnecessary maintenance fees.
Don’t let your cash lose buying power. Open a high-yield savings account now.
The bottom line
A high-yield savings account is a great option to consider right now. The returns on these accounts often outpace inflation while offering you the safety and accessibility you need. Compare your options today to make your savings work harder for you.
Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids and two dogs.
