Experienced a pay cut? Here’s what to do next:
- Discuss a plan with family members
- Adjust your budget or create a new one
- Trim non-essential expenses
In July 2019, the Federal Reserve cut its benchmark interest rate for the first time in more than a decade, according to Fed data. In recent years, however, the talk was all about the Federal Reserve hiking rates.
In 2018, for example, the Fed raised its benchmark interest rate—commonly known as the federal funds rate, which is the interest rate banks charge each other to lend funds overnight—a total of four times. The Fed also raised the federal funds rate three times in 2017.
With all of this talk about the Federal Reserve and interest rates, you may be wondering: When will savings account interest rates rise?
If you have a savings account, or are considering opening one, consider these takeaways on savings interest rates:
If the Federal Reserve raises interest rates, you may see banks raise savings account interest rates, too. That means you can earn a little more for every dollar in your savings account.
Eager to know when savings account interest rates will rise after seeing headlines announcing a Federal Reserve rate hike? If banks do decide to raise savings account interest rates, it may not happen right away, so the impact to your finances will not be immediate. You can typically log into your savings account to confirm the interest rate you are earning, often expressed as the Annual Percentage Yield (APY), or you can check on your bank’s website.
If the Federal Reserve increases interest rates and banks pass higher savings interest rates on to consumers, it is well worth the time to shop around for the best rates. This is especially true as many large, brick-and-mortar banks are still offering little to no interest on savings accounts.
If you’re considering opening an online savings account, keep a close eye on the APY to see which account could give you the most interest earnings. The higher the APY, the more money you will be able to put toward your financial goals. Unlike a savings account interest rate, the APY considers how often the interest compounds. Your savings account interest could compound daily, monthly, quarterly or annually.
When comparing accounts, don’t forget to consider other features, including minimum balance requirements, fees and access to customer service.
While a Federal Reserve interest rate increase may mean a little more in your savings account (thanks to a higher savings account interest rate), practicing good money habits consistently will help you the most. Build an emergency fund, keep your spending within your means, save regularly and remember your financial goals to stay motivated.
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