Have a Savings Account? Make This Important Move at the Start of 2024

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Check up on your savings account early this year. There’s a good reason to. Read on to learn more. 

For much of 2022 and 2023, the Federal Reserve had a big inflation problem on its hands. Consumers were getting utterly crushed by stubbornly high living costs, and something had to be done to break that cycle.

That something was a series of interest rate hikes that the Fed implemented in 2022 and 2023. Those hikes drove the cost of borrowing upward, which is something consumers haven’t been thrilled with. But on a positive note, the Fed’s rate hikes have given savers an opportunity to earn more interest on their money.

Since inflation has, in recent months, been trending in a positive direction (meaning downward), the Fed hasn’t been as aggressive with its interest rate hikes. Quite the contrary — the central bank opted to pause its rate hikes during its final three meetings of 2023.

That pause has been good news for consumers looking to borrow money. But it may not be the best news for savers. If you have money in a savings account, you may want to check to make sure the interest rate on it hasn’t gone down in the wake of the Fed’s recent actions.

Are you earning less interest on your money?

Because the Fed hasn’t yet cut rates, there’s a good chance many banks have held steady on the interest rates they’ve been offering on savings accounts. But your bank may have decided to pre-emptively lower the interest rate on your savings in anticipation of rate cuts from the Fed.

As such, now’s a good time to check to see if that’s happened. If so, and the change is modest and you otherwise like your bank, then you may not want to jump ship — especially if your savings account’s interest rate was competitive to begin with. But if the interest rate on your savings has changed for the worse and other banks are paying more, it may be time for a switch.

It’s a good time to consider a move to a CD

If the money in your savings account is meant to serve as your emergency fund, then you don’t want to tie it up in a CD. But if you have a separate account for emergencies, then you may want to think about moving some of your money into a CD.

CD rates are still competitive given that the Fed hasn’t cut rates yet. But rate cuts are definitely on economists’ radar for this year. So you may want to lock in a CD before rates fall.

If you lock in, say, a 12-month CD at 5.25%, a $5,000 deposit will earn you $262.50 over the year. If you stick to a savings account paying 4.50% this month, but the rate on your account then falls gradually in 2024, you’ll earn less than $225 (exactly how much less will depend on how much less interest your bank opts to pay).

Of course, if you’re not ready to commit to a CD, then you’re better off sticking to a savings account, since there can be penalties for cashing out a CD before it’s set to mature. Otherwise, you may want to lock in a competitive interest rate on your money before rate cuts take effect.

Either way, though, it’s a good idea to be aware of what your savings account is paying. So check up on that sooner rather than later, and then keep checking every few weeks to make sure a change isn’t in order.

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