Here's Why I'm Not Worried About My Savings Account if Rates Drop
KEY POINTS
- I don't look at savings as an investment, so the interest rate isn't a big deal.
- My saving cash is for emergencies and future expenses.
- It's good to have a high-yield savings account, but as long as you're also investing, you don't need to worry if savings rates drop.
There's a very good chance that interest rates will drop this year. In fact, 100% of interest rate traders expect the Federal Reserve to lower rates in September, according to CME Group's FedWatch tool.
If interest rates drop, banks and credit unions will lower rates on their accounts, too. You may have seen advice on how to prepare for this, such as putting your savings in the highest-paying certificates of deposit (CDs) to lock in a rate now.
You certainly could do that if you know you won't need the money anytime soon (most CDs have early withdrawal penalties). Personally, I'm keeping my money where it is in a high-yield savings account. And I'm not worried about rates dropping for one simple reason.
It's savings, not an investment
Like many people, I have savings and investments. Growth is my goal with investments, which is why I invest heavily in the stock market through a brokerage account. Historically, its long-term returns have averaged out to about 10% per year. For just about anyone, it's wise to invest to build wealth for the future.
Our Picks for the Best High-Yield Savings Accounts of 2024
| Product | APY | Min. to Earn | |
American Express® High Yield Savings
Member FDIC.
APY
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
|
$0
|
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
Capital One 360 Performance Savings
Member FDIC.
APY
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
|
$0
|
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
Western Alliance Bank High-Yield Savings Premier
Member FDIC.
APY
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
Min. to earn
$500 to open, $0.01 for max APY
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
|
$500 to open, $0.01 for max APY
|
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
With savings, it's a different story. I have an emergency fund for financial security, and I also save to pay for future expenses, including vacations and big-ticket purchases.
Growth isn't my goal with my savings. I like earning a competitive rate on it, which is why I keep it in a high-yield savings account. But I don't need to get the highest possible return. I have investments for that.
There are plenty of ways I could squeeze out more earnings from my savings. I could switch savings accounts to earn an extra 0.5%. Or I could open CDs so I'm protected when rates drop. But for me, there's value in keeping it simple. I don't want to constantly chase the highest APY or keep track of CD maturity dates. I just want my savings to be safe and earn a reasonable amount of interest.
How to manage your savings
Figuring out what to do with your savings doesn't need to be complicated. First, look for an account with the following features:
- A competitive APY (anything over 4% is good right now)
- FDIC insurance (or NCUA insurance if the account is with a credit union)
- No monthly fees
For accounts that check all those boxes, go to Motley Fool Money's list of the best high-yield savings accounts.
Once you have an account, you can deposit your savings there. Now, the rate could go up and down from time to time, depending on what happens with interest rates as a whole. As long as you have a high-yield account, you can be confident that you're earning a good rate.
If you have savings that you won't need anytime soon, you may decide to open a CD for that. CDs can be useful when they work with your money goals. But there's also nothing wrong with just keeping your savings in a savings account. It's simple, it's easy, and it leaves you with more time to focus on other things.
Our Research Expert
Lyle Daly is a freelance writer who has been covering personal finance since 2016.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.