Is it still the case that High-Yield Savings Accounts are surpassing inflation rates?

In the face of rising inflation, many individuals are seeking ways to protect their savings and cushion their finances. Here, we explore two options: high-yield savings accounts and Certificates of Deposit (CDs).

High-Yield Savings Accounts: A Balance of Access and Growth

High-yield savings accounts, such as the one offered by Newtek Bank with a competitive 4.35% Annual Percentage Yield (APY), provide a balance between quick cash access and growth. Unlike traditional savings accounts, which offer a meagre 0.6% APY (below the current inflation rate of 2.7%), high-yield savings accounts offer returns well above the inflation rate.

For instance, with a $10,000 deposit in a Newtek Bank high-yield savings account, you could earn $435 in interest in one year. If you were to increase your deposit to $50,000, you could earn $2,175 in interest, and with a significant $25,000 deposit, you could potentially earn $1,087.50 in interest in one year. Even if the Federal Reserve cuts rates and savings APYs drop, high-yield savings accounts, like the one offered by Newtek Bank, could still outpace inflation.

Marcus by Goldman Sachs also offers a high-yield savings account with a maximum APY of 4.35%. Established savers may find these accounts appealing as they often come with low deposit requirements and no monthly fees.

Money Market Accounts: A Minimum Balance Requirement

Money market accounts, while offering quick cash access with the perks of a savings account, require a minimum balance of $1,000. If you can meet this requirement, you may find the variable interest rates appealing, as they are similar to those of high-yield savings accounts. However, if the Federal Reserve cuts rates or lowers savings APYs, it could lower money market account returns.

CDs: A Long-Term Commitment for Stability

CDs are best for lump sums that won't be needed before maturity. They offer fixed interest rates, unlike high-yield savings accounts, which can be an advantage if you're looking for stability. If you lock in a CD rate now, it won't be affected by future rate cuts.

Shopping for the best CD rates can be done using a tool powered by Bankrate. Established savers may consider CDs or money market accounts to shield money from rate cuts and inflation. However, many CDs have terms that don't allow early withdrawals, potentially resulting in lost interest.

In the current climate of inflation, it's essential to consider your financial goals and risk tolerance when choosing between high-yield savings accounts, money market accounts, and CDs. Placing money in high-yield savings accounts or CDs can help protect your savings from the erosive effects of inflation.

Cumulative inflation shows prices are over 24% higher than they were in February 2020. Food prices, specifically beef prices, have reached an all-time high according to Newsweek. With these price increases, it's crucial to take steps to safeguard your finances.

The Fed's wait-and-see approach could be extended due to inflation. In July and June, inflation remained at 2.7%. If you're concerned about the potential impact of inflation on your savings, consider exploring high-yield savings accounts or CDs to help protect your hard-earned money.

Is it still the case that High-Yield Savings Accounts are surpassing inflation rates?