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MoneyWatch: Managing Your Money
By Matt Richardson
Edited By Angelica Leicht
/ CBS News
Returns on high-yield savings accounts haven't always been this high. In 2020, for example, when the interest rate environment was dramatically lower due to the pandemic, rates on high-yield savings accounts were around 0.50%. That left savers with very little opportunity to protect and grow their savings. But as the pandemic waned and inflation rose, the interest rate environment changed dramatically. This has caused the borrowing costs for millions to rocket upward, but it has also raised the benefit of high-yield savings and certificates of deposit (CD) accounts tremendously.
Now, in the rate environment of 2024, savers are essentially losing money by not depositing some or all of their funds into one or both of these account types. High-yield savings accounts, in particular, are especially advantageous right now, particularly if you're looking for a smart place to deposit $10,000or more. In fact, there are multiple compelling reasons why you should deposit $10,000 into a high-yield savings account now.
See how much more interest you could be earning with a high-yield savings account here.
Why you should deposit $10,000 into a high-yield savings account now
Here are three reasons why you should consider depositing $10,000 into a high-yield savings account:
The rate environment is favorable
Higher interest rates are bad news for homebuyers and those who rely on credit cards, but they're positive for savers looking to make some extra interest on their money. In fact, rates on high-yield savings accounts are currently hovering around 5%, and you may be able to find something even higher if you shop around for an online bank.
On a $10,000 deposit, that would equate to $500 after one year. That's a substantial amount of interest, and it dwarfs the minimal 0.46% that most savers are currently getting with their regular savings accounts.
So, if you want to make more money on your savings, a high-yield savings account is a great way to do so now. Get started here.
But the rate environment could change
The benchmark interest rate hit a 22-year high last summer, settling in at a range between 5.25% and 5.50%. And in subsequent meetings, the Federal Reserve elected to keep rates paused. While it's possible another rate hike could take place recent success in the battle against inflation makes that unlikely. In fact, rate cuts are already being forecast for as soon as May or June. So it makes sense to take advantage of elevated rates now. Interest rates on these types of accounts are variable, so they can and will change over time. But if you move now, you can start earning today's high rate right away.
You'll maintain flexibility
Flexibility and ease of use are important in any economic environment but can be particularly beneficial in today's market. Fortunately, high-yield savings accounts offer this flexibility by working just like regular savings accounts do — just at that higher interest rate. Some lenders will even provide ATM cards so that you can access your account as you do your others. This will allow you to make deposits and withdrawals with ease, all while growing your balance with an elevated interest rate in the interim.
Learn more about your high-yield savings account options here today.
The bottom line
High-yield savings accounts may not have been the best move a few years ago, but they provide a great way to grow your money now. With interest rates around 5% currently, savers should act promptly to reap the immediate benefits, particularly when they know that the rate environment won't be as favorable for these accounts long-term. Plus, they'll maintain the flexibility they're already accustomed to with a regular savings account, thus currently making a high-yield savings account a rare financial win-win.
