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- The highest savings account rates have stayed around 5% APY during the first half of 2024.
- The Federal hasn't lowered rates so far in 2024, which has impacted savings account rates.
- A high-yield savings account is still a good place for savings goals or an emergency fund.
Many savings accounts still offer competitive interest rates right now. Most noticeably, the best high-yield savings accounts pay up to 6.17% APY (Annual Percentage Yield)
Will savings rates stay high in the second half of 2024? We'll explain the savings rates forecast for 2024 and how to determine if you should open a high-yield savings account.
What happened to savings account interest rates during the first half of 2024?
Savings account interest rates have stayed relatively the same in 2024 because they've been impacted by the Federal Reserve's decisions.
"Last year, some economists were even predicting a rate cut as early as March because we started last year where inflation was above 6%, and around mid-last year, it dropped to around 3%. The problem was it didn't decline after that," says Alvin Carlos, CFA, CFP® , and managing partner of District Capital Management.
Each bank sets its own criteria for changing bank account interest rates, so you might have seen small rate increases or cuts from individual institutions.
Overall though, banks have kept savings account interest rates high to remain competitive with one another since the Fed hasn't raised or dropped rates thus far in 2024. Many online banks still have 5% interest savings accounts, which has been great for savers because it's not typical for bank accounts to have interest rates that beat inflation.
Are savings interest rates going down in 2024?
Savings account interest rates have remained comparable to rates offered at the end of 2023, but that's likely to change. Calvin says that many banks will likely automatically adjust savings account rates as soon as there is a rate cut, and you'll see top rates start to drop more.
At the July Fed meeting, the Fed continued its pause on rate hikes with the goal of getting closer to an inflation rate of 2%.
The Consumer Price Index is a tool for measuring inflation. The CPI increased 3.0% year over year in June, which shows that inflation has been getting closer to the Fed's target inflation rate of 2%.
The CME FedWatch Tool shows that there is a high likelihood that the Fed could start cutting rates as soon as September.
Ultimately, average savings rates will also likely begin to drop more toward the end of 2024, with some individual banks deciding to decrease rates more quickly than others.
Should I open a high-yield savings account?
You may still want to open a high-yield savings account if you're contributing money to short-term savings goals or establishing an emergency fund. Unlike CDs, high-yield savings accounts allow you to access your money at any time (although some banks only permit six free transactions per month).
Keep in mind that high-yield savings accounts have variable interest rates, not fixed rates. This means that while some high-yield savings accounts currently pay around 5% APY, your rate could increase or decrease at any time. That said, high-yield savings accounts still pay more than traditional savings accounts at big brick-and-mortar banks, regardless of rate fluctuations.
If you locked in a high CD rate, however, you would be able to keep the same rate for the full term. For example, if you opened a 1-year CD, it would maintain the same rate for one full year starting on the date you opened it. However, if you need to withdraw money during the CD term, you would have to pay a penalty.
Choosing between a high-yield savings account and a CD will depend on the timeline of your savings goal and whether you need immediate access to your savings. You have to decide whether it's worth locking in at a high rate or if there's another place that's more suitable for your money.
Savings rate forecast FAQs
Money market account rates are expected to drop in 2024, similar to savings and CD rates. The Federal Reserve's decisions will influence changes in money market account rates.
Yes, the interest rates on high-yield savings accounts are likely to drop more in the second half of 2024. The exact time when savings rates will fall is speculative. That said, when the Federal Reserve begins cutting rates, savings rates may start dropping. It's still worth opening a high-yield savings account before interest rates fall, though, because they can be useful for emergency savings or specific savings goals.
If savings rates go down in 2024, assess your financial goals and determine whether your money is in the right place. Savings accounts and money market accounts could be good spots if you need to access your savings regularly, while CDs may be appealing for money you don't need to access immediately. You could also consider investing for long-term financial goals.
Yes, you could open a CD and maintain a fixed interest rate for a specific term. If you want to take out money during the term, you'll have to pay an early withdrawal penalty. Also, keep in mind that the CD rate forecast also indicates that CD rates will likely starting dropping more in the second half of 2024.
