Personal Finance

Don't Leave Free Money on the Table: Savings Yields Have Rebounded

Maurie Backman

Published: February 24, 2025 11:24 am

There was a time not so long ago when you could barely get a savings account to pay you 1% on your money. But if you’re thinking that’s still the case, you’re sorely mistaken.

In fact, I’m here to tell you that savings accounts are paying quite generously these days. And if you’re not taking advantage of a high-yield savings account, you’re missing out.

Why it pays to put money in savings right now

You’ve probably noticed that we’re in the midst of a cycle of lingering inflation. Grocery prices are still up, and things are more expensive than they used to be across the board.

While that’s a bad thing in theory, the silver lining is that the Federal Reserve spent much of 2022 and 2023 raising interest rates in an effort to slow the pace of inflation. And while the Fed did cut rates a few times in late 2024, high-yield savings accounts are still paying quite generously.

Many high-yield savings accounts are offering rates in the upper 3% range. And you might even manage to get 4% on your money if you shop around. That’s a far cry from where rates were a few years ago.

Who a high-yield savings account makes sense for

If you’re someone who’s socking money away for a retirement that’s 25 years away, I’m not going to tell you to put that cash into a high-yield savings account. In that case, you need your money to grow at a much faster pace, so I’d recommend investing it in an IRA, 401(k), or brokerage account.

On the other hand, if you’re someone who’s trying to build an emergency fund, then I’d absolutely recommend opening a high-yield savings account. In fact, you specifically do not want to invest your emergency fund in stocks or other assets that could lose value.

It’s also best to use a high-yield savings account to sock away money for near-term goals. Say you’re buying a house next year, or you own one already but are planning for a major renovation in 2026. The money you have earmarked for goals that are coming up soon should sit in a high-yield savings account, where your balance is protected.

Finally, if you’re on the cusp of retiring, it’s a good idea to make sure you have one to two years’ worth of living expenses in cash. If you don’t, take the opportunity to open a high-yield savings account and pump more money into it for your own protection.

And if you don’t have cash to transfer over, consider taking some gains in your stock portfolio and converting them to cash. This isn’t necessarily something you want to do if you’re in your 30s or 40s with an anticipated retirement in your 60s. Rather, if you’re a few years shy of retirement, now’s a good time to load up on cash. And taking gains in your portfolio may be a suitable option.

Shop around for the best offer

While high-yield savings accounts are paying pretty well across the board right now, it’s important to shop around to get the best deal. Also, review different banks’ requirements.

Some banks may impose an account minimum, or charge different fees for keeping your money in savings. Spend a little time comparing your choices so you end up with the high-yield savings account that’s best for you.