3 money-saving measures to take as inflation continues to rise

Inflation has been a concern for some time now. In fact, by mid-2022, the The Federal Reserve raised its target federal funds rate for the first time since 2018 in response to COVID-era high inflation. Since then, it has increased its benchmark rate several times, pushing it to a level A peak for 23 yearswhere it still stands today.

Even though inflation appeared to be decreasing towards the end of 2023, price growth has found a second wind with inflation coming in high so far in 2024. And while high inflation rates can make budgeting more difficult and debt more expensive, they can also make deposit account returns more attractive.

With the high federal funds rate, profits on some deposit accounts can outpace inflation. While inflation persists, there are some smart moves you could make to make your money work harder for you.

Compare the leading high-yield savings accounts to get a better return on your savings.

3 money-saving measures to take as inflation continues to rise

Here are three savings steps you should take as inflation continues to rise:

Open a high-yield savings account

Many today high-yield savings accounts offer returns above inflation – even if inflation rates rise. So, these accounts can help you produce a positive inflation-adjusted return on your savings. But today’s strong returns aren’t the only reason it’s wise to open a high yield savings account right away.

The rise in interest rates is the The Federal Reserve’s weapon of choice against high inflation levels. So, if inflation continues to rise, the Federal Reserve could raise its target federal funds rate again. And if you have money in a high-yield savings account, that can be good news.

After all, the federal funds rate is a common benchmark for consumer interest rates. So, if high inflation levels lead to a further rise in the federal funds rate, interest rates on high yield savings accounts could go up too. This means your income could increase in the future.

Find out how much you could earn with a high-yield savings account today.

Opt for short-term CDs

In the current inflationary environment, where high interest rates have become the norm, yields on certificates of deposit (CDs) can be impressive. Leading CDs offer yields above 5%. But there is a catch. You must keep the money you deposit into the account until it matures. If you access your money early, you may have to pay a penalty.

The good news is that you can choose to open a Short term CD. These CDs typically mature in one year or less.

If inflation continues to rise, the Federal Reserve could raise rates. But if your money is tied up in a long-term CD, you won’t be able to benefit from these rate increases. Choosing a short-term CD can give you liquidity (or the ability to access your money) sooner. This means that if rates rise ahead of time, your short-term CD can mature in time for you to take advantage of potentially higher returns.

Open a high-yield checking account

While high-yield savings accounts and CDs are great places for your cash savings, they’re not the only type of high-interest account to adopt today. A high yield current account might help.

“High-yield checking accounts can be a good choice for some consumers because they offer higher interest rates than traditional checking accounts,” says Cameron Burskey, senior partner at financial planning firm Cornerstone Financial Services. “If these match your financial needs and usage habits, they can be a valuable option for earning additional interest on your checking account balance.”

High-yield checking accounts are similar to traditional checking accounts in that they give you a safe, highly liquid place to store your daily spending money. But the difference lies in their yields. While many traditional checking accounts offer no yield, high-yield checking accounts currently offer yields of up to 4.62%.

And since returns on high-yielding checking accounts are generally variablethey could increase if inflation continues to rise.

Compare today’s top high-yield checking accounts now.

The essential

Inflation continues to soar despite the Federal Reserve’s attempts to curb price growth. If this continues, the Fed could raise rates further. But this could be good news for savers.

If you want to make the most of today’s inflationary environment, it’s time to take a strategic approach with your savings account (and checking account). Consider opening a high-yield savings account and a short-term CD to shelter your savings. And keep your daily spending money in a high-yielding checking account. In doing so, you will turn today’s high inflation rates into positive news by capitalizing on the profits made possible by inflation and rising interest rates.