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- High-yield savings accounts are paying high rates right now.
- A recent survey shows only 5% of middle-income Americans are taking advantage of these rates.
- You don’t have to leave your existing bank to open a new account — you can have more than one.
Savings accounts are experiencing a resurgence right now. Known for offering little to no interest, savings account interest rates have greatly increased as the Federal Reserve raised interest rates several times in 2022 and 2023 to combat inflation.
The average savings account interest rate in the US is 0.42% APY, but the account you choose has a big impact on that rate. If you opened a savings account years ago and never looked again, it’s likely you’re not earning nearly as much as you could.
Given the significant difference in interest rates between regular savings accounts and high-yield savings accounts, it might make sense to switch your savings into an account that could grow your money faster.
There are multiple savings accounts paying over 4%, and even over 5%, right now. Those include:
Opening a new savings account is easier than people think
But many consumers aren’t budging. According to the Santander US Paths to Prosperity survey, only 5% of middle-income Americans changed their banking providers as a result of recent banking events. This means that in the face of historically high interest rates, most consumers are not using this to their advantage.
There are a couple of reasons for this:
Although higher interest rates are being advertised everywhere, what this would actually mean for the money in your savings account isn’t fully explained. So simply saying a higher interest rate is a good thing isn’t enough to make people take action especially when it comes to moving money. If you want to understand how much an interest rate increase would earn you, online savings calculators like the one at Investor.gov, a federal government website, can show you what you will earn on your money at different rates.
Even if savers are aware of interest rates, they might think that opening up a new account will be too much of a hassle. Some may be concerned that they will miss out on the perks and benefits of their main bank, especially in terms of monthly fee waivers, bank account bonuses, or reimbursement of out-of-network ATM fees. However, you don’t have to leave your main bank to open a high-yield savings account at a new one. You can even link to your original account and transfer money back and forth.
I have my own version of a savings ladder using three savings accounts: an emergency fund, a high-yield savings account, and a savings account for a down payment on a home.
Saving is always important, and now even more so. Taking advantage of higher interest rates on savings accounts makes sound financial sense, and will set you up for financial security in the long run.
Products in this post: Betterment Cash Reserve Account, CloudBank 24/7 High Yield Savings Account, Milli Savings Account, SoFi Checking and Savings
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