High-Yield Savings: How to take advantage of interest rates

For more than a decade, savings accounts offered little to no interest, making it near impossible to keep up with inflation. But in recent years, the tides have turned, if you know where to look.

If you have extra cash on hand and want to start an emergency fund or a nest egg—a high-yield savings account can be a great option, providing an easy way to build your savings, with virtually no risk.

Hi, my name is John Gigliello and you are listening to Invest in Knowledge, a podcast about all things financial. After a life-altering health issue at age 39, my calling in life became clear: To share my knowledge of personal finance with PEOPLE who are looking to make smart and responsible choices with their money. Only through education, action and accountability can YOU build the confidence and security YOU need to live a SATISFYING life.

Today, I am going to talk about high-yield savings accounts and how you can take advantage of the relatively high interest rates of the past two years.

The content for this podcast episode was derived, in part, from a recent Wall Street Journal article on this subject.

High-yield savings accounts have been providing some of the best returns on cash in years, and with inflation still above the Federal Reserve’s 2% target, savers should have at least a few more months to enjoy generous interest rates, the Journal reported. But the bounty won’t last forever. 

When the Fed starts cutting its benchmark federal-funds, rates on savings accounts should decline as well. Wall Street observers now expect rate cuts to begin in September or later. Until recently, the prevailing idea was that cuts would begin early this summer.

Even though good rates are available now, many savers continue to earn meager returns. The average savings account pays just 0.45%, according to the Federal Deposit Insurance Corp.—but with a little legwork you can do far better. Some savings accounts offer an Annual Percentage Yield (APY) as high as 5%, a rate that’s especially appealing considering inflation is hovering around 3%.

Taking advantage of higher rates could mean as much as $500 a year for every $10,000 you have saved, Michael Finke, professor of wealth management at the American College of Financial Services told the Wall Street Journal, adding. “If you’re not paying attention, you’re leaving a lot of money on the table.”

Choosing the best savings account for your needs involves looking at more than just the advertised rate, though. You need to consider how you plan to use the account, how you prefer to bank and how much you plan to keep in savings.