In a rising rate environment, now is the time to save 

Since early 2022, Americans have watched loan and other credit instrument rates increase with each Federal (fed) Reserve rate hike. With 11 fed rate hikes in the past year and a half and inflation still hitting most pocketbooks, each time the Federal Open Market Committee (FOMC) meets, media coverage skyrockets, yet consumers may be left wondering what it really means for them.

High interest rates mean good news for savers

Increasing fed rates have also meant higher yields on interest-bearing accounts (such as a savings account, money market or certificate of deposit).

The FDIC reported in March 2022 the average rate on a 6-month certificate of deposit (CD) was 0.09% APY (annual percentage yield). As of June 2023, the rate was 1.26% APY (annual percentage yield). If money was set aside in March 2022, the CD rate would have earned $0.90 in interest versus $12.56 for money set aside with a June 2023 CD rate. If you have money to save, now is a great time to get your money working for you.

Doing more for your best interest

One easy way to earn interest is to move excess funds from your checking account to an interest-bearing savings, money market or CD account. If you don’t need access to your money right away, a CD usually earns a higher annual percentage yield (APY), serves as a more stable investment, and gives you a predictable return (if you don’t cash it in early).

It can be tough to know which type of interest-bearing account is right for your situation. While there are many factors to consider, generally, it comes down to liquidity needs. Read our comparison here.

Plan for living and emergency expenses

A general rule of thumb is to create an emergency fund that provides you with immediate access for up to three months of living expenses along with a buffer to cushion against unexpected small charges. Your emergency fund is best kept in a separate savings or money market account to keep it from co-mingling with your “everyday funds” while also allowing it to collect interest on the balance and continue to grow.

Earn more with bank special offers

Banks often offer specials on money markets and CDs. Specials may be available for a limited time, so be sure to keep an eye on your bank’s website or app so that you can take advantage of unique offers. Just think, if your $2,000 could earn 5.00% APY vs. 1.5% with a 7-month CD, you’d have $40 extra in savings at the end of the CD term*.

*$2,000 @ 5.00% APY for 7 months = $57.54 earned in interest, $2,000 @ 1.5% APY for 7 months = $17.45 earned in interest

Ready to start saving?

View our specials, open an account online or visit one of our locations.

Articles contained in our news section are not intended to provide recommendations or specific advice. Consult with a professional when making financial decisions. Once published, articles are not updated; information may be outdated.