Where Should Your Savings Be Right Now? Somewhere You Can Earn at Least 5%

If you have cash in savings right now, the easiest place to put it unfortunately isn’t the smartest place. That’s because a standard savings account at your primary bank may pay virtually zero interest, while today you can earn an eye-popping 5.00% or more by choosing one of numerous other places to stash your cash.

High-yield savings accounts, money market accounts, and certificates of deposit (CDs) are all paying record rates right now, thanks to the Federal Reserve’s 15-month campaign to combat inflation by raising the federal funds rate. Not only that, but today's Fed announcement indicates it is likely to raise rates still higher this year.

The happy result for savers is bank interest rates that are already at their highest levels since at least 2007, with likely rate improvements still to come. But to score these record rates, you have to shop around, and we can make that easy.

Earn More with a High-Yield Savings Account

If you’ve only ever opened a savings account with the bank where you have your primary checking account, you’re likely missing out on significant interest earnings on your cash. That’s because high-yield savings accounts at other banks are offering significantly higher rates, and opening one is generally quick and easy.

Even if you aren’t earning a near-zero rate on your cash, but have an account paying the national average of 0.40% APY, you can multiply your monthly interest earnings by 10, 12, or almost 13 times right now, simply by moving cash to one of the options in our daily ranking of the best-paying savings accounts. In fact, the leading account is paying a stellar 5.12% APY.

Whatever funds you move, you’ll be able to make withdrawals anytime you want (though some institutions limit the number of withdrawals you can make each month), as well as make additional deposits at any time. So there is no long-term commitment of your funds, which is great for flexibility when you don’t know when you’ll want to use the money (though it may make it harder to resist the temptation to dip into savings for an unplanned purchase).

One thing that’s important to remember with any kind of savings account is that its rate is variable, meaning it can change at any time, and the bank or credit union doesn’t need to forewarn you. So while savings account rates are at record highs right now, when the Fed starts lowering rates sometime in the future, the rate on your savings account will come down, too.

Add Check-Writing with a Money Market Account

Another very similar option to a high-yield savings account is a money market account. Though in the past, these accounts offered higher returns than savings accounts in exchange for you maintaining a large minimum balance, such as $25,000, things have changed in today’s banking marketplace. Now money market and savings accounts are essentially interchangeable, both offering a variety of rates with various minimum balance requirements, including some with no required minimum.

The one key difference that remains is that money market accounts will offer you the ability to write checks. A savings account will not provide this option. So if being able to write paper checks directly from your savings is important to you, check our daily ranking of the best money market accounts.

Everything mentioned in our discussion of high-yield savings accounts above applies equally to money market accounts, such as the likely need to open the account at a bank that’s new to you if you want a top rate, the flexibility to withdraw and deposit funds at will, and the rate on your account being variable, meaning it will begin to drop once the federal funds rate begins declining.

Extend a Record Rate Into the Future with CDs

If some of the money you’re saving can stay put for a few months, a year, or even longer, you can earn even more by putting your money in a certificate of deposit. Though CDs require committing your funds for the duration of the CD term, which most typically range from 3 months to 5 years, the payoff is that your rate is locked and guaranteed for the full length of the CD, no matter what happens with the Federal Reserve and rates.

Right now, the industry-leading nationwide CD is paying 5.65% APY, but there are more than 30 options in our daily ranking of the best CDs that are offering rates of 5.25% APY or higher. You can even lock in a rate of 5.00% APY right now that will hold for four years.

The risk with a CD, however, is that if you find you need to withdraw your money before the CD’s maturity date, the bank or credit union will subtract an early withdrawal penalty from your interest earnings. These vary widely, from mild to harsh to so onerous they can eat into your initial deposit. So be sure to find out the penalty policy on any CD you’re considering before you commit.

The beauty of CDs is that they are a great option when rates are currently high but expected to go down in the near future, because they allow you to extend how long you can enjoy today’s rates. If the Fed starts reducing rates late this year or in 2024, savings and money market rates will go down. But any CD rate you've locked in will continue to be guaranteed.

Where Are Today's Interest Rates Headed?

This afternoon the Federal Reserve implemented what's considered a skip in its aggressive rate-hike campaign that it launched in March 2022, which has included 10 rate hikes in the 15 months since. It's the first time in 11 meetings that the Fed has not announced another hike.

But though the Fed's rate-setting committee decided to hold rates where they are for now, details from the Fed's announcement indicate that it's likely to raise rates two more times in 2023, which could elevate the federal funds rate another 0.50%.

With each additional hike that comes to fruition, rates on savings, money market, and CDs would also climb, meaning we are likely not at peak rates yet for these savings products. That in turn means potentially further good news for savers in the coming months.

Of course, Fed rate predictions are far from iron-clad, as each meeting decision is based on real-time economic data and financial news. So though further 2023 increases by the Fed seem probable, they are certainly not guaranteed.

Alternatives to Bank Accounts for Your Savings

Of course, keeping your savings in the bank is not your only option. You could also invest it in a number of different bond or brokerage products. (We never, however, recommend keeping it under your mattress.)

• I Bonds - These U.S. government bonds are designed to hedge against inflation, hence the name I bonds. But while they sometimes outpay CDs, other times the rate is lower. You also cannot withdraw your funds, for any reason, until one year passes.
• U.S. Treasuries - Treasury bonds allow you to lend money to the U.S. government for a fixed amount of time. Considered one of the safest investments in the world, a T-Bill is a note with a duration ranging between 4 weeks and 1 year. 
• Bond Funds - Researching individual bonds is a bigger, more involved project than most savers are up for, but you can easily invest in a bond mutual fund or exchange traded fund (ETF), which is diversified across many different bond issues. You can also enter and exit the fund at any time.
• Cash Reserve Accounts or Money Market Funds - If you have an account at a brokerage firm, you can also hold savings in a cash reserve account or money market fund (not to be confused with the money market accounts offered by banks). But be sure to research the rate you’ll earn, because often it will be far less than what you could make with a CD, savings account, or money market account at a bank.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer money market, savings accounts, and CDs to customers nationwide, and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.