The next Federal Open Market Committee (FOMC) is this week, which means we are most likely on the verge of another Fed rate hike.
While higher federal rates result in better rates on savings accounts, which is a good thing for savers, still-high inflation can make it harder to save. For Americans who already feel financially insecure, spending more on basic necessities only makes it harder to secure a savings safety net.
“We want to be able to live on what we earn and keep our spending in line,” says Andrew Tudor, board-certified financial planner and founder of Alchemist Wealth, a financial planning firm. “And when expenses go up and income doesn’t go up as much, then we have to learn to cut back.”
Luckily, the savings and CD rates we track at NextAdvisor continue to increase. And even if you can save just a few extra dollars, the right savings vehicle can help you generate a return to keep up with inflation and get you closer to your goals.
How NextAdvisor analyzes CD and savings rates
In our average CD and savings rate analysis, we compare three different averages. First, we review the Federal Deposit Insurance Corporation (FDIC) national deposit rates and Bankrate’s national index of deposit accounts based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). We also calculate the current average rate of each bank on our Best CD Rates and Best Savings Rates lists – you can read more about how we select the banks included in our lists on these pages.
The differences between the national average savings rates and NextAdvisor’s interest rate analysis are largely due to the much higher APYs that online banks pay.
National FDIC and Bankrate surveys cover many different types of financial institutions, including large national banks that charge as little as 0.01% APY. Our lists, on the other hand, are made up of online or hybrid banks with lower overheads, which allows them to pass savings on to customers in the form of interest.
This week’s best savings courses
Interest rates on high-yield savings accounts are rising, and many of the accounts we track continued to rise ahead of this week’s Fed meeting.
National average savings account rates, reported by Bankrate and the Federal Deposit Insurance Corporation (FDIC), were flat this week at 0.16% and 0.21%, respectively. Both indices track not only high-yielding but also traditional savings accounts, which tend to lag far behind when interest rates rise.
The average interest rate for the top savings accounts we track at NextAdvisor increased from 2.54% to 2.73% week-over-week. But many banks made significant rate hikes ahead of next week’s Fed meeting. In fact, two banks on our list are now offering a sky-high 3.50% APR. Here are some of the currently highest interest rates for savings accounts:
Those savings account rates will only continue to rise if the Fed continues to hike rates, says Greg McBride, CFA, chief financial analyst at Bankrate. Like NextAdvisor, Bankrate is owned by Red Ventures.
“They have a very active Federal Reserve, and it’s kind of a rising tide that lifts the ships,” says McBride. “Banks that want to hold deposits or bring in new ones have to be competitive.” As a result, some savings accounts could hit 4%, he says.
The best CD tariffs at the moment
CD rates also rose again this week for all maturities, after experts predicted interest rates on most deposit accounts, including CDs, will rise this year.
According to Bankrate’s weekly national rates survey, 1-year CD rates rose 0.02% to 1.05%, while 3-year and 5-year CD rates rose just 0.01% and averaged 0.97% and 1.05%, respectively. 00% pressed. The FDIC CD Interest Rate Index (which is updated monthly) still shows an average of 0.71% for 1-year, 0.77% for 3-year and 0.83% for 5-year CDs.
Among the high yield CDs we track at NextAdvisor, the average 1-year CD rate is 3.61%, 3-year CDs is 3.41%, and 5-year CDs are 3.66%. Here are some of this week’s best CD prices by term:
- Capital One: 4.15% APY
- CFG Bank: 4.10% APY
- Sync Bank: 4.01% APY
- Bread Savings: 4.25% APY
- Capital One: 4.25% APY
- CFG Bank: 4.10% APY
While rates are increasing for all CD maturities, it’s best to stick to short-term CDs. Another Fed rate hike will most likely occur this week. Locking in a long-term rate now means giving up a better rate in days or weeks.
Luckily, the price difference isn’t too big at the moment.
“We have this really weird environment where we have longer-term rates that are almost the same as short-term rates,” said Shannon Gray, board-certified financial planner and founder of InvestEdge Planning, a San Diego-based financial planning firm.
Build an emergency fund when prices rise
With rising costs and growing economic uncertainty, it’s more important than ever to balance savings with your monthly budget.
Not only should you have your emergency fund in a safe place, says Tudor, but you should also determine the right spending ratios to cover expenses and meet your goals.
Tudor recommends putting money into a high-yielding savings account to get a little boost while also having the money available in case you need it for unexpected expenses or a sudden loss of income. The goal isn’t for the money to outperform inflation, but to keep it safe and easily accessible, he says.
“We don’t know if we’ll catch up in a year and prices will be higher than they are now,” says Tudor. “We don’t know if interest rates will be much higher than they are now. So we have some tough decisions to make.” For many families who are on the upper end of their budgets, this could mean having just one car or cutting other essential expenses, he adds.
READ MORE: We need to talk about emergency funds. How three experts realign their savings strategies
Building an emergency fund from scratch can be overwhelming: Experts recommend aiming for three to six months’ worth of spending, which can add up to thousands of dollars for many people.
Instead, focus on consistently saving what you can. You can set up recurring automatic transactions into a savings account to set it up and forget it. Most importantly, put the money in an account where you can earn interest on your balance if interest rates continue to rise. Your money will keep up with inflation and the rate of return can help you earn more from your savings.
Save for long-term goals
If your emergency fund is in good shape and you’re saving for longer-term goals, e.g. For example, a down payment on your first home or a new car, a CD can be a great way to save your cash.
CDs don’t offer as much flexibility as high-yield savings accounts. But they’re not as risky as today’s volatile stock market for savings you want for the next few years.
“What we’ve seen in bonds this year and what we’ve seen in the stock market this year should give some people the confidence to take a 3% CD and feel good about it,” says Tudor.
For example, if you plan to buy a house next year, earning 3-4% APY on a nine or 12 month CD can help you ensure the money is safe, earning interest and available when you need it.
Before committing to a CD term, however, consider how different terms can serve your goals. For example, if you plan not to use the money in the next 5 to 10 years, you can invest it for a better return compared to what CDs offer.
And even if you’re saving for other goals, don’t forget the importance of saving for retirement in a special account like a 401(k) or Roth IRA.
Frequently asked questions about the best savings and CD prices
Which bank has the best savings rate?
Dollar Savings Direct and Salem Five Direct have the best rates of any bank we track this week at 3.50% APY.
What is a good CD rate?
Here are the average CD prices for each term we track at NextAdvisor:
- 1 year: 3.61% APR
- 2 years: 3.72% APR
- 3 years: 3.41% APR
- 5 years: 3.66% annual interest
Keep in mind that some banks may offer higher interest rates but may also have high minimum deposits.
Will CD prices go up in 2022?
Yes, experts predict that we can expect CD rates for all maturities to rise as well as long as the Fed keeps raising the federal interest rate spread. However, it’s best to stick to short-term CDs for now to avoid locking in a rate on a long-term CD if interest rates continue to rise.
Additional savings and CD resources
Whether you’re building your emergency fund or saving for a long-term goal, these resources can help you develop your savings strategy with the best savings tools and tips.