Why you should open a high-yield savings account this January
A new year is here, and it's the perfect time to boost your savings and set yourself up for a financially secure future. One of the best things you can do to improve your long-term outlook is to open a high-yield savings account this January and start making regular deposits into it throughout the year. With rates high but potentially dipping soon, now is the perfect time to open an account. Even after rates start to go down, if you keep making deposits the power of compounding interest will leave you with a healthy amount of savings.
Find the right high-yield savings account for you online now.
Why you should open a high-yield savings account this January
No matter how old you are or what your overall financial situation is, it's never a bad time to start saving more money. Just as important as saving money, though, is putting it somewhere it will be able to work for you rather than sitting stagnant and technically losing value due to inflation. Here are a few of the reasons you should open a high-yield savings account this January.
Rates are high – but that might not last
Consumer savings rates are high right now. You can currently find high-yield savings accounts offering between 4.25% and 5.27% yields. Online-only banks most often offer these high yields. Traditional financial institutions have overhead costs like rent and employee salaries for brick-and-mortar locations. Online banks don't have these costs and can thus frequently offer higher rates for their customers.
Rates might not be this high for too much longer, though. The reason rates have risen recently is that the Federal Reserve has repeatedly raised the federal funds rate in reaction to inflation. While the Fed does not set the interest rates banks offer directly, the interest rates for consumer savings products do tend to track alongside the federal funds rate.
The inflation rate has decreased significantly, and the Fed has kept the federal funds rate paused for three straight meetings. There have also been indications that cuts will be coming in 2024 if economic indicators, including inflation, remain on track. When this happens, high-yield savings rates could also decrease. Opening a high-yield savings account now, then, will let you take advantage of the current high rate environment while it lasts.
Look online today and find a high-yield savings account that works for you.
Compound interest adds up
Even if you're young and feel years away from needing to make a big purchase like a house, opening a high-yield savings account this January is a good idea. Younger people actually stand to benefit the most from opening an account right now, as they'll have longer to let their money sit and earn interest.
With a high-yield savings account, you don't just earn money on what you put in – you also earn interest on the interest you earn. This is called compounding. Depending on how often your account compounds, you could end up earning a lot of interest even if you don't put all that much into your account each month.
Your money is losing value
If you have your money sitting in a checking account or a regular savings account, you are likely losing value each day. How is this possible? One word - inflation.
Even though the inflation rate is down from where it was in 2022, it still sat at around 3% in November 2023. Inflation means that your dollar doesn't go as far in purchasing goods and services. This means that your money sitting earning little to no interest is going down in value, as you won't be able to buy as much with it when you take it out. Plus, the average savings interest rate on a regular account is just 0.46% currently, according to the FDIC. That's many times less than what you can secure with a top high-yield savings account.
Using a high-yield savings account allows you to outpace inflation, making it more likely you'll have enough to achieve your financial goals when the time comes.
The bottom line
A high-yield savings account lets you save money and earn enough interest to keep up with and even potentially beat inflation. Now is the perfect time to open an account, as interest rates are high – but might soon decrease. Get started here now.
