Many people scoff at the idea of seeking out the best savings accounts as we have got 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 5%, which you can find on the the best CDs, best high yield savings account or best money market accounts.
Before we go on, check out our tool 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 $1,000s 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 after the Federal Reserve lifted the fed funds rate, a key overnight bank lending rate, to a target range of 5.25% to 5.5%. It was the 11th interest rate hike since March 2022, bringing the federal funds rate to the highest level its been in 22 years. In its accompanying statement, the Fed also signaled that more rate hikes were still on the table, if not likely, in the coming months as inflation continues to wane. The Fed stated that it “ is strongly committed to returning inflation to its 2 percent objective.”
While a Fed rate hike doesn’t guarantee a rise in savings rates, banks tend to at least roughly follow the Fed’s trajectory, so you’d expect some upward movement.
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.
