Why you should open a high-yield savings account this March

When it comes to financial products and services, timing is critical. If you buy an insurance policy or invest in an asset at the wrong time, for example, you could lose most (or all) of your money. But if you wait, the window of opportunity may close in the interim. 

While millions of Americans have recently had to cope with higher borrowing costs thanks to inflation and high interest rates, the news hasn't been all bad. Those who timed their savings accounts properly, for example, have earned exponentially more interest than they could have if they opened those same accounts in 2020 or 2021.

In particular, those with certificates of deposit (CDs) and high-yield savings accounts have seen their savings grow significantly. But with a new inflation report coming on March 12 and another Federal Reserve meeting set for March 19, many may be wondering if now is still a good time to open one of these account types. Below, we'll detail three reasons why you should open a high-yield savings account this March.

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Why you should open a high-yield savings account this March

Here are three compelling reasons why you should open a high-yield savings account this March.

Rates are still high

While you may have lost out on a few years of earnings without one of these accounts, the interest rates on high-yield savings accounts haven't dropped. With a little research, it's easy to find an account right now with a rate of 5.50%. 

And if you're willing to use an online bank, which tends to offer more competitive rates than banks with physical locations, you may be able to get a rate even higher than that. That could result in significant earnings over time, simply by moving your funds from a traditional account to a high-yield savings one. 

Plus, many high-yield savings accounts come with ATM cards and other accessibility features, so your everyday banking needs can remain the same.

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But they could fall soon

While rates on these accounts are high, it's important to note that they are variable, meaning they're subject to change daily depending on the larger rate environment. And with a cut to the Fed's benchmark interest rate now expected sometime in May or June, the optimal time to open one of these accounts is likely coming to an end. 

While a rate cut isn't expected to dramatically reduce what one could earn with a high-yield savings account, it doesn't make sense to wait for that to happen. By getting started in March you can immediately start earning high returns, which can then help buffer any expected rate cuts to come.

The alternatives have drawbacks

Sure, CDs generally have higher rates than high-yield savings accounts but the difference can be negligible (think less than 1 percentage point). And unlike CDs, which give you that higher rate in exchange for locking your money away for a set term, high-yield savings accounts will still provide big returns even if you make routine withdrawals and deposits. 

Traditional savings accounts, on the other hand, may come with the greatest accessibility but the returns are barely existent. The average savings account interest rate right now is just 0.46%, according to the FDIC. That means you're losing money by keeping your funds in a traditional account instead of a high-yield one.

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The bottom line

With rates still high but predicted to fall later this spring, now could be one of the last great times in this economic cycle to open a high-yield savings account. And considering the locked nature of CDs and the minimal returns that traditional accounts come with, it's wise to look to a high-yield savings account this month. By opening one now you'll earn higher interest right away while maintaining most of the flexibility you're used to with a regular account. Just don't wait much longer because if inflation cools and the Fed cuts rates you'll likely regret not being proactive this month.