- Savings rates have continued to rise nationwide
even as the Federal Reserve has signaled
it may not continue to raise the Fed funds rate as quickly.
The FDIC reports that the average savings
interest rate nationwide is 0.30% APY,
which is up 5% from a year ago.
However, the best savings account rates
and money market account rates are all at 4% or higher.
Savings account rates have been rising throughout 2022,
spurred by the Federal Reserve's campaign
of raising interest rates to tame inflation.
In this video, we'll discuss how to maximize your savings
right now and some banks to consider.
Hey everyone, this is Andy Hill with The College Investor,
investing and personal finance for Millennials.
If you're new to the channel and like what you hear,
please hit Subscribe so you're ready
when our next video comes out, thanks.
According to a recent Bloomberg Report,
banks are facing stiffer competition for funds.
As savings rates rise, consumers are realizing
that they can earn a lot more interest safely
by moving to higher-yielding options.
This has put banks in a position
where they are having to raise rates to keep up.
This month, several banks and credit unions
have pushed the interest rates on their savings accounts
to 4% annual percentage yield or higher.
And these are liquid accounts.
Rates on Certificates of Deposits, CDs, are even higher.
As of the time of this recording,
you can currently find the following.
With Western Alliance Bank, you can get 4.23% APY.
With Great Lakes Credit Union, you can get 4.2% APY.
America First Credit Union, 4.15% APY.
And Blue Federal Credit Union, 4.15% APY.
Then you have bank CD rates,
which have been trending even higher.
The best 12-month CD rates are 4.5% APY or higher.
According to data from Fidelity,
12 month to 18-month maturities
appear to be the yield inflection point
right now on new issue CDs.
Here's why higher rates are to be expected.
The Fed has signaled that it intends to keep raising
interest rates until inflation subsides,
even if that means smaller rate hikes going forward.
The Fed funds rate is currently 4% and could go higher soon.
The Fed funds rate is the interest rate
that banks can borrow from the Federal Reserve.
As such, it's loosely linked to what savers can earn
on savings and CDs.
If a bank can gain a customer and deposits at the same rate
or even slightly higher than the Fed funds rate,
it could be a win-win for the bank.
According to financial expert Jim Wang of Best Wallet Hacks,
"With the Federal Reserve set to continue to increase rates
"to combat inflation, I expect savings rates to continue
"to soar for the next few months,
"along with the target Fed rate.
"Consumers are finally getting a good reason
"to save their money."
Given that the rates may continue to rise,
where should savers be looking to park their cash?
Well, given that interest rates will continue to rise,
you should be wary to lock up your money.
As such, savings accounts and money market accounts
will continue to be the best choices for most savers.
With the rates on savings accounts at 4% APY,
it's a good deal versus alternatives
like a Certificate of Deposit where you might earn 0.5% more
but you're locked in for 12 months.
In the next 30 to 45 days, rates may rise to 4.5%
or even higher and now your attractive CD
may not seem so great.
Along with the attractive savings rates,
more banks are starting to offer promotional incentives
to attract new customers.
We have a consistently updating list of bank bonus offers
on our website with offers up to $500
for opening a new account.
We'll have that link in our video description.
When you combine a bonus offer with a high interest rate,
it can be a really great deal.
In the end, the important thing to remember
is that where you bank, it matters.
Using a savings account effectively is the best way
to earn passive income on your money.
If you don't switch banks or keep up with the higher
interest rates, you're leaving money on the table.
Joseph Hogue from the popular Let's Talk Money
YouTube channel reminds savers that deposit rates
languished last year at just 0.06% APY.
However, now they've been jumping
and consumers should take notice.
Switching $10,000 from a bank that pays 0.24% APY
to a bank that pays 4% APY means that you'll earn
an extra $376 per year.
That's a big deal considering the average American
feels like they can't afford a $400 emergency expense.
So grab that savings, people.
Enough from our side, everyone. We wanna hear from you.
Are you maximizing your savings right now?
Are any of these offers or deals
seeming like a good deal for you?
Which bank are you currently working with?
And what type of interest rate are you getting?
That could help people in the comments.
Please let us know in those comments
so everybody can benefit from it.
Thanks for hanging out today, everyone.
This is Andy Hill from The College Investor.
We'll see you in the next video.