Establishing a savings strategy is one of the most important things you can do to create financial security. Whether you’re just getting started or you’re a long-term saver, having a thoughtful plan can make a big difference.
Interest rates are another key factor. Although they have reached historic lows since the start of the COVID-19 pandemic, the Federal Reserve recently announced that they’re likely to go up over the coming months. This could make growing your savings easier, and offer a higher rate of return. Below, we share some tips on how to maximize your savings as interest rates begin to rise.
Set Attainable Savings Goals
A great way to make the most of your savings is to set specific goals. These can be more general (such as establishing an emergency fund) or more specific (such as setting aside enough money for a down payment on a home).
When establishing your goals, it’s helpful to ask yourself a few questions:
- What are your biggest financial priorities?
- Do you have an emergency fund that can cover unexpected expenses?
- Do you need your savings to be easily accessible?
Your answers to these questions will help you determine your needs and create savings goals to match. Once you’ve established your top priorities, we recommend listing out how much you’d like to set aside to meet them.
For example, if you’re saving for a vacation, you can make your savings goal the full cost of your trip and then break it down into weekly or monthly targets. This is a great way to make saving feel more achievable and ensure that you’re putting aside enough money to cover all of your needs.
Focus on Optimizing Your Savings
Although interest rates are projected to rise steadily over the next few years, it’s important to note that this will happen gradually. Focusing on long-term growth can be an effective way to develop your savings strategy while also meeting your savings goals.
Where you decide to keep your savings can also have a big impact on how those savings will grow over time. Popular options include traditional savings accounts, high-yield savings accounts, certificates of deposit (CDs), and brokerage accounts. While each has its advantages, some also carry disadvantages including higher levels of risks and a lack of liquidity.
Here are a few key things to know about each type of account:
- Traditional Savings Accounts: Often a go-to option, traditional savings accounts are a reliable way to grow savings with a modest interest rate.
- High-Yield Savings Accounts: Like traditional savings accounts, high-yield accounts provide a safe way to increase savings and generally offer a substantially higher interest rate. These types of accounts can be found through both traditional and online banks, and they offer a strong rate of return along with ease of access. One key thing to note is that high-yield savings accounts can also come with fees and may require a minimum balance, so it’s important to weigh your options if you decide to open one.
- CDs: With slightly higher interest rates, CDs can be a good option for those who are interested in longer-term vehicles. Typical terms range from six months to 18 months, though longer terms are also available. It’s worth noting, however, that CDs have less liquidity and carry penalties for withdrawing money early.
- Brokerage Accounts: For those looking for even longer-term options, brokerage accounts offer a way to access a range of investment options including stocks, bonds, and mutual funds. While this type of investing often carries higher returns, it also comes with a higher level of risk, and withdrawing money can be tricky if you don’t time the market right.
Choose a Savings Vehicle That’s Right for You
Depending on your circumstances, it’s likely that a certain type of savings option will suit your needs more effectively than the others. If you have a longer time horizon, a brokerage account or CD can both be solid choices. If you’re looking for easier access to your funds or the ability to minimize the risks associated with investing, a high-yield savings account can often provide more benefits.
When choosing a high-yield savings account, it’s important to consider both the interest rate and the institution offering it. With a highly competitive interest rate of 1.61% Annual Percentage Yield and the ability to open an account in minutes, the Bask Interest Savings Account from Bask Bank is a great option. It also has zero minimum balance requirements and zero monthly account fees. What’s more, there is no cap on the amount of interest you can earn, so the more you save, the more you earn.
If you’re interested in other ways to maximize your savings, Bask Bank also offers the Bask Mileage Savings Account that earns one American Airlines AAdvantage® mile for every $1 saved annually. They also make it easy to seamlessly transfer money between the two accounts so that you can earn interest while also earning miles to put toward the cost of upcoming trips.
Above all, making the most of your savings requires a careful approach. By having a clear understanding of your needs and focusing on long-term growth, you can achieve your goals and increase your financial security.