Hiring numbers rose in May. Here's what savers should do now.
The economy may be doing better than experts initially thought.
At least that was one takeaway from new unemployment numbers released on June 2, 2023. While the unemployment rate ticked up from 3.4% to 3.7%, employers added 339,000 jobs overall in May, the Labor Department said. That's significantly above the 190,000 new jobs economists predicted would be added in the month. Jobs were added in a wide array of industries from construction and transportation to health care and government.
The announcement is a welcome one for a country still coping with inflation and high interest rates designed to battle that inflation. But what does the news mean for savers? Specifically, what will the Federal Reserve do with this new data point in their next meeting scheduled for later in June?
The Fed could use the news to raise rates yet again, or they could keep them where they are. If they do either, savers should strongly consider two deposit vehicles that can help them take advantage of a high rate environment.
Start by exploring high-yield savings accounts here now to see how much more you could be earning on your money.
What savers should do now
There are two primary options for savers looking to take advantage of today's high interest rates. Here's what they should strongly consider doing now.
Open a high-yield savings account
The interest rate on a regular savings account is 0.40%, according to the FDIC. But you could get an account with a rate 12 times higher simply by opening a high-yield savings account instead. These accounts operate like regular savings accounts, just at a much higher interest rate.
Look at the numbers to see how much more you could be earning. A $5,000 deposit into a regular savings account will only grow to $5,020 after a full year. But that same amount in a high-yield savings account will increase to $5,175 over those same 12 months. And that's at the 3.5% interest rate! If you shop around, you can find something even higher.
That said, rates on high-yield savings accounts are variable and dependent on what the Fed does. Knowing this, it makes sense to open a high-yield account now while rates remain high. If the Fed keeps rates where they are or raises them later this month, then you'll earn even more interest. But in the interim, it pays to start earning that extra money now.
Get started with a high-yield savings account here now.
Open a CD
If you're not sure where interest rates are heading - but still want to lock in a high one - then a certificate of deposit (CD) account may be the way to go. Interest rates on CDs are locked in for the duration of the CD's term, regardless of any activity by the Fed. So, if you open a CD with a 3.5% interest rate now and rates stay the same in July but go down in August, you'll still be locked in at June's higher rate.
That said, to get that locked rate, you'll need to be comfortable securing your money for the full term of the CD. If you withdraw funds before the term expires, you could forfeit some or all of the interest you've earned to date (although you can explore some no-penalty CDs too).
Still, it may be worth it for you to take advantage of the higher interest rates - and to protect against the endless cycle of deposits and withdrawals your funds would normally be subject to if left in a regular account.
Explore your CD options now to see how much more you could be earning.
The bottom line
No one knows exactly where the economy is heading, although the better-than-expected hiring numbers released Friday were encouraging. What those mean to the Fed, however, and how the Fed reacts in terms of interest rates remains to be seen.
For now, savers should do their best to take advantage of higher rates by opening a high-yield savings account, CD or both. These deposit vehicles offer a safe and smart way to protect and grow your savings despite any volatility or uncertainty in the larger economy.
