Two years of high interest rates have been a huge blow to Americans looking to get a mortgage and get a car loan.
But those with large savings have benefited from the past two years of high interest rates – if they were wise.
And there’s still time for Americans to earn more than five percent on savings at banks and credit unions.
The Federal Reserve last summer raised interest rates to a 23-year high, between 5.25 and 5.50 percent, in an effort to curb inflation.
They were kept at that level on Wednesday, but are expected to be lowered in September. And that will cause savings interest rates to drop.
There’s still time to take action, and moving $5,000 from a current or low-payment savings account to a high-interest savings account would mean an additional $227.50 per year.
Moving money into high-interest accounts can really pay off
Those who deposited money into high-yield accounts last year earned more than five percent. That’s a figure not unheard of in a generation.
But while many benefited, 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 have $5,000 in an account that pays that, you would only make $22.50 in a year. But for someone earning 5 percent, it would grow by $250.
One money manager said he sees customers admitting there is way too much in my checking account, knowing they have to move some to another account to earn interest.
“But that doesn’t mean they did anything about it,” said Dann Ryan, managing partner at Sincerus Advisory, a wealth management firm based in New York City. Wall Street Journal.
According to a Santander Bank survey published in May, 21 percent of Americans who save are unaware of the interest on their savings accounts.
Among those who knew their interest rate, the majority earned less than 3 percent.
In the past year, less than a fifth of Americans transferred money to a higher-paying account.
Older people are most likely to earn a better return, the study also showed.
What must we do
First, move the emergency money — which is kept in case the car breaks down, for example — or the money kept for tax payments to an online account that allows withdrawals but provides a high return.
These won’t be as high as the highest paying ones, which require you to put money away, but they should be much better than a checking account that pays
For the longer term, Americans can use so-called Certificate of Deposit Accounts or CDs. These pay a fixed interest rate for a certain period.
According to Bankrate, these still pay more than 5 percent for those stuck for three, six or nine months.
The other option is to put money into bonds, which can have a term of one to 10 years.