Two years of high interest rates have been a blow to Americans looking to get a mortgage and car loan.
But those with big cash savings have benefited from the last two years of high interest rates, if they were smart.
And there’s still time for Americans to earn more than 5 percent on savings at banks and credit unions.
The Federal Reserve raised rates last summer to a 23-year high of between 5.25 and 5.50 percent as it tried to rein in inflation.
He kept them at that level on Wednesday, but is expected to cut them in September. And that will cause savings rates to fall.
There’s still time to act, and moving $5,000 from a current or low-paying savings account to a high-yield one would mean an extra $227.50 a year.
Transferring money to high-interest accounts can really pay off
Those who put money into high-yield accounts over the past year earned more than 5 percent. This is a rate not unprecedented in a generation.
But while many took advantage, tens of millions did not.
Americans have $17.5 trillion in banks, but the average account earns just 0.45 percent, according to the Federal Deposit Insurance Corporation.
If you had $5,000 in an account that paid that, you would earn only $22.50 in a year. But in one that earned 5 percent, it would grow by $250.
One money manager said he sees clients admit, “I have too much in my checking account,” knowing they should transfer some to another account to earn interest.
“But that doesn’t mean they’ve done anything about it,” said Dann Ryan, managing partner of Sincerus Advisory, a New York City-based wealth management firm. Wall Street Journal.
According to a Santander Bank survey published in May, 21 percent of Americans who save do not know the interest rate on their savings accounts.
Among those who knew their interest rate, most earned less than 3 percent.
Over the past year, less than a fifth of Americans transferred money to a higher-paying account.
The survey also found that older people are more likely to perform better.
To do
First, move your emergency cash (which you save for when your car breaks down, for example) or money saved for paying taxes to an online account that allows withdrawals but has a high yield.
These won’t be as high as the higher paying ones that require you to put money away, but they should be much better than a checking account that pays
In the long term, Americans can use so-called certificates of deposit accounts or CDs. These pay a fixed interest rate for a set period of time.
According to Bankrate, these continue to pay more than 5 percent for those who stay locked in for three, six or nine months.
The other option is to invest money in bonds, which can have a duration of one to ten years.