Keep Saving for Your Goals (Even When Rates Change)

September 9, 2024

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The Federal Reserve began a series of interest rate hikes in 2022 to help combat inflation, and the higher-for-longer rate environment has been a boost to savers. But as inflation continues to show signs of moderating, the Fed has signaled that policymakers may be ready to cut the fed funds rate.

While cuts will likely impact APYs across various savings accounts, it’s as important as ever to keep up with your savings and continue working towards your goals.

Stick with a high-yield account for a competitive APY

Whether rates go up or down, everyone needs a savings account – an accessible place to keep your cash for both expected and unexpected expenses. High-yield savings accounts can be a great tool to help you save for those expenses, as they typically offer higher APYs than traditional savings accounts – even when interest rates drop.

Looking to build an emergency fund, go on a dream vacation, or save for a down payment? The right high-yield savings account can help you reach your short-term goals.

If you already have a high-yield savings account and you like your bank, stick with it and keep going on your savings. If you’d like to open an account, do some comparative shopping and pay attention to details like:

APY and compounding frequency
Account fees
Balance minimums
Withdrawal rules
FDIC coverage

You’ll likely find that online banks can offer more competitive rates than traditional brick-and-mortar banks. Because online banks don’t have to maintain physical branches, they typically have lower overhead or operating costs. And those savings can be passed on to their customers in the form of higher APYs, low or no minimum balance requirements, and typically lower fees.

Learn more: Guide to Savings Accounts

Consider opening a high-yield CD to lock in your APY

Since the Fed is expected to make several rate cuts before the end of the year, now can be a good time to open a high-yield certificate of deposit (CD) account to lock in an attractive rate.

While savings account APYs are variable, many CDs come with fixed rates, so once you lock in an APY, you’ll know exactly how much interest you could earn by the end of your CD term. In other words, you won’t have to worry about potential rate cuts.

CDs also often offer a higher APY than savings accounts. The trade-off for the higher rate, however, is that your cash may be less accessible. If you withdraw your money before the CD term ends or matures, you can usually expect to pay an early withdrawal penalty (unless it’s a no-penalty CD).

CDs are a smart option for those looking to earn interest on any extra cash that you don’t need to use for something else immediately. Here are a few tips to keep in mind when you’re ready to open an account.

Be realistic about the length of the term you can commit to.
Find the right type of CD that fits your goals.
Determine how much money you want to deposit.
Shop around to find competitive rates.
Make sure your CD account is held at an FDIC-member bank.

Remember, no matter what the rate environment looks like, it’s important to stay motivated and keep up with your savings.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.