The Federal Reserve raised rates again in July -- but experts don’t expect savings rates to jump much higher. That means now is the best time to take advantage of a competitive high-yield savings or certificates of deposit rate.
But regardless of whether savings rates are high, building an emergency fund and setting savings goals are a fundamental part of your financial well-being. The Fed’s next move is out of our control, said Delyanne Barros, founder of The Money Coach. But what’s more important is saving what you can.
But saving isn’t easy for many right now. Approximately 22% of US adults don’t have emergency savings, according to Bankrate’s latest emergency saving survey. Of that number, 74% aren’t able to save due to economic factors, and more than half say inflation is the key driver.
Savings and CD rates are changing rapidly across banks and accounts. Experts recommend comparing rates before opening an account to get the best APY possible. Enter your information below to get CNET’s partners’ best rate for your area.
How do you prioritize saving money if budgeting or cutting back isn’t possible? We spoke to a few financial experts and learned ways to help you reframe your financial situation and save what you can. We’ll run you through the current rates for the best high-yield savings and CDs, and then unpack ways to make saving money more of a routine.
High-yield savings rates average 4.74%
In the past three months, the average high-yield savings APY has increased from 4.38% to 4.74% APY for banks we track weekly at CNET.
The biggest gains have been over the past few weeks. Many banks are pushing savings rates over 5.00% APY to earn a bigger return on the money you’re trying to save. This week, Bask Bank pushed its savings APY from 4.85% to 5.00%. And CIT inched its APY from 4.95% to 5.05%. These banks join others on our list with high-yield savings APYs of 5% or higher, including UFB Direct, TAB Bank, My Banking Direct and Varo (on balances up to $5,000).
No banks we track lowered rates this week; most kept rates the same.
Short-term CD rates still fall around 5%
This week, only Marcus by Goldman Sachs moved its CD rates higher. The bank raised its six-month, nine-month, 18-month and one- and two-year CD rates. Other banks we track at CNET kept rates the same.
Short-term rates are still higher than longer terms right now. For example, the average six-month CD rate is now 4.70% APY while the five-year APY remains 4.02%. But it’s important to note that CD rates for terms shorter than one year don’t earn the full year of interest but only for the term.
Right now, a great option to maximize your return is a one-year CD, which offers a 5.10% APY. If you keep the money in the CD for the full term, you’ll earn the entire return and will have access to the money in a year to reinvest or use towards a savings goal.
Facing the barriers to saving money
While rates remain high, it may not mean much if you’re struggling to save due to the rippling effects of the Fed’s rate hikes and high inflation. Right now, there are many reasons why setting aside money might be tough.
If you’re struggling to balance building your emergency savings with other savings goals, here are some tips from experts to help you start saving now, no matter where you’re at in your financial journey.
1. Talk about your financial situation
If you’re facing financial hardships, Barros recommends talking to someone you trust about your financial situation or working with a money coach to identify financial issues you may be facing and how to overcome them.
While budgeting can help, that’s not always the answer, said Barros. “For a lot of people, it’s very, very emotional.”
This could involve talking to a financial counselor, friend or family member about your money struggles to start the discussion and talk through potential solutions with someone you trust.
2. Reach out to your community
If you’re living paycheck to paycheck and struggling to balance saving money with your monthly expenses, start by checking out what’s available in your community. You may find you have access to free or reduced services that can help you cut costs to put more towards savings goals. There might also be local resources like free debt counseling or financial education programs. You can also talk to your neighbors, other parents you know, homeowners or business owners in the community to get a better understanding of available resources.
Back-to-school season, for example, can be a huge financial strain for many families. Talking to the school and other parents can help you find out if there are free resources available to help cover the cost of supplies or extracurricular activities. This might allow you enough wiggle room in your budget to start putting money towards savings goals, like building an emergency fund.
3. Cut out non-essential services, if you can
It’s always helpful to revisit your budget, to see if you can negotiate expenses or eliminate services you no longer need. Speak with providers, like your cell phone company, about lower plan options. Or, cut or downgrade subscriptions temporarily and reroute any money you save to your financial goals. Be sure to also take advantage of any free events in your community to help save money, like parks and playgrounds for kids and festivals.
And if you’re in a situation where you have enough money to cover your bills and still have disposable income or funds leftover, but you’re not saving, it’s time to evaluate what’s going on, said Barros. There may be a spending issue, an isolated event that impacts income or overspending. It may also be the lack of motivation, finding a reason to save, or anxiety around money.
For example, you might underestimate spending $20 on dining out every time you decide to order food. “It feels so small that they don’t feel like it will make any difference,” said Barros. But those small underestimations can pile up into significant spending at the end of the month. Reviewing your finances to figure out where your money is going is essential. “It’s really about sitting down and talking about the root of the issue and what can change.”
Cutting back won’t make you a millionaire, but it might allow you some breathing room to begin saving a little extra.
4. Start small
When you’re ready to start saving, start small to stick to the habit. Remember, any amount can add up to a larger goal over time -- even if you automatically transfer a few dollars to a high-yield savings account each week.
“I’m a very, very big fan of automating savings,” said Shang Saavedra, founder of Save My Cents, Inc. When you set up money to be transferred from your paycheck to your savings account, the less likely you are to spend it, said Saavedra. Once the money is transferred, you’re less tempted to spend it, but it’s still there if you need it. “Try to automate an amount that feels like a little bit of a challenge but should still be doable and see where things go,” Saavedra suggested.
And instead of being faced with a goal that seems overwhelming, like working toward six to nine months of emergency savings, set smaller goals. “Prioritize having one month’s worth of expenses and a high-yield savings account,” said Bernadette Joy, founder of Crush Your Money Goals. Once you reach this milestone, you can set another small goal, and slowly build your way up to more robust savings goals from there.
5. Balance paying down debt and growing your savings
If you’re struggling to pay down debt and saving doesn’t seem like an option, you may consider meeting in the middle. Instead of solely working to pay down your debt or focusing on your savings, chip away at each goal simultaneously.
Pay at least the minimum on your credit card (and extra if you can), while still putting some money into your savings account each week. Once you have at least one month’s worth of savings, you can put more of your money towards high-interest debt that is likely costing you more in overall interest, Joy said.
Starting your savings journey now
While the Fed’s rate moves can help guide your financial decisions, making the conscious decision to save is far more important than the extra interest your money might earn. Make savings a regular part of your weekly or monthly routine so you can establish an emergency cushion to draw on when unexpected expenses pop up. As your savings grows, you can work towards additional savings goals, like putting money towards future vacations or big purchases, such as a new car.
