By Joshua Rodriguez, CBS MoneyWatch featuring Shane Cummings, CFP®, AIF®, Wealth Advisor & Director of Technology/Cybersecurity
Chances are that you’ve heard the Federal Reserve kept interest rates the same for the second time in a row. The target federal funds rate sets the foundation for the interest you earn on savings and other deposit accounts. It’s also a deciding factor in the interest you pay on credit cards, mortgages and other loans.
That means when the Fed increases its target federal funds rate, debt costs more and returns on savings and other deposit accounts grow. When the Fed reduces its target rate, debt becomes cheaper and returns on deposit accounts fall.
So, what does the interest rate pause mean for your savings? Perhaps more importantly, is it still worth opening that high-yield savings account you’ve been considering?
Is a high-yield savings account worth it with interest rates paused?
Even with interest rates paused, it’s worth opening a high-yield savings account, says Shane Cummings, CFP, CEPA, AIF, wealth advisor and the Director of Technology/Cybersecurity at Halbert Hargrove. High-yield savings accounts are “one of the easiest ways to boost your return without taking on more risk,” he says. That is, as long as the new account is FDIC or NCUA insured.
Here are a few reasons why high-yield savings accounts are still worth it while interest rates are paused:
Interest rates are still high
The interest rate pause means that the Federal Reserve hasn’t increased or decreased its target federal funds rate. That means savings account interest rates aren’t likely to rise or fall in the near term. Then again, considering today’s interest rate environment, that’s good news for savers.
