How to grow your savings (even if interest rates decline)

In 2024, the Federal Reserve began to lower interest rates from a 23-year high. Specifically, the U.S. central bank made three cuts, amounting to 100 basis points, or one percentage point. While this trend suggests Fed officials feel inflation is getting under control, it also means savers might find it more challenging to earn meaningful returns on their hard-earned money.

However, a falling rate environment doesn’t mean you must accept sluggish savings growth. The 2024 Generational Wealth study from YouGov reveals that nearly three-quarters of Americans, including 81% of Gen Zers and 79% of millennials, plan to ramp up their savings in 2025.

The study also found that Gen Z and millennials view obtaining generational wealth as more achievable now than in the past. Nearly half of the respondents said they’re optimistic about their financial futures in 2025, compared to just a quarter of older generations who believe the same.

If you count yourself among the many hoping to save more this coming year, these money-saving tips can help you save more effectively, even if interest rates dip.

How to make your savings grow faster

While traditional savings accounts may not produce the same yields in a falling-interest-rate environment, that doesn’t mean you should put your goal of saving money in 2025 on hold. The best way to grow your savings is to consistently sock away money, even in small amounts. In fact, it’s one of the most beneficial financial habits you can build.

These tried-and-true strategies can help you squeeze more money out of your budget and reach your savings goals faster:

1. Trim your spending

If you’re wondering how to make your savings grow faster, the answer is simple: The less you spend, the more you can save. It could be as straightforward as canceling an unused subscription or two or giving up your gym membership to seek out free ways to exercise. Then, take the money you’re saving and tuck it away in savings instead.

According to the YouGov study, the top categories where people plan to first cut their spending are eating out (58%), travel (38%), and clothing (36%).

Here are some other simple tips for spending less—and, therefore, saving more:

• Buy generic or store-brand products.
• Eat out less; when you do, find ways to save at restaurants.
• Plan cheap weekend getaway trips instead of splurging on costly vacations.
• Curb your impulse buys.
• Funnel savings into a dedicated account to avoid temptation.

2. Automate your savings

Saving money is a lot like exercising—if you skip a session here and there, you might fall out of the habit entirely. So, when thinking about the best way to grow your savings, automate your deposits so you don’t have to think about it. If you schedule transfers to happen when you get paid, you likely won’t even miss the money in your regular account. To stay motivated, you can set up different savings accounts with unique names, like “new kitchen” or “college fund.” 

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3. Gamify your approach

Once you automate your savings, boosting your contributions doesn’t need to feel like a slog—and turning it into a kind of game or challenge can provide the extra motivation you need to stay on track.

Not sure how to grow your savings? One popular approach is to compete with friends or family members. Talk about your goals openly—as part of a trend known as loud budgeting—and then see who can save the highest percentage of their income or log the most no-spend days. You can use a simple spreadsheet to keep track and see who’s ahead.

If competition isn’t your thing, set personal goals instead. Can you negotiate a better rate on your phone bill or car insurance? Find an extra $50 to save this week? Challenge yourself to beat last month’s savings total for an extra sense of accomplishment.

4. Explore your options

Even in a falling rate environment, it pays to comparison shop for the highest yields on savings accounts. Some banks might offer promotional rates to new customers, and even slight differences in yield can make a healthy difference over time, thanks to compound interest.

Online banks like Discover^® tend to offer higher rates than traditional brick-and-mortar banks, in part because they have lower overhead costs. When evaluating high-yield accounts, pay attention to any minimum balance requirements and monthly fees, which can affect your earnings.

When determining how to grow your savings, you can explore options beyond conventional bank accounts. Veronica Karas, CFP^®, principal at a financial advisory firm, and author of a series of personal finance books, mentions U.S. savings bonds: “Series EE savings bonds come with a nice guarantee: They double in value after 20 years, regardless of market conditions.”

5. Consider certificates of deposit (CDs)

While the time required to invest in bonds might be daunting to some, CDs offer a savings solution for those willing to tuck away funds for a shorter period. Because you agree to keep your money in a CD account for a set term, you’ll earn a higher yield that’s fixed for the CD’s duration, which can range from a few months to several years.

The trade-off is that, unlike traditional savings accounts, you may face an early withdrawal penalty if you need to access your money before the CD matures.

6. Max out your 401(k) match

If your employer offers a 401(k) or similar retirement plan with a matching contribution, making the most of that match should be one of your top financial priorities, even before maxing out other savings accounts. Generally, any 401(k) contributions you make are taken from your paycheck before taxes, offering another reason why this company benefit is one of the best ways to grow your savings.

A 401(k) match from your company is essentially free money—but you need to contribute enough of your earnings to claim it. For example, if your company will match 50 cents of each dollar you contribute up to 6% of your salary, aim to save at least 6% to capture the full match. Most 401(k)s provide access to the stock market through carefully selected index funds that offer a range of risk levels.

And the stock market might be just the place to keep some of your money growing when rates are declining. Connor Bauserman, a financial planner and podcast host, provides some insight: “Historical data shows that, generally, stock market returns have tended to be higher during falling interest rate environments compared to rising rate environments.”

Falling rates often stimulate economic growth and borrowing, which can boost corporate profits and drive up stock values. This, in turn, might attract more investors. Before making any investment decisions, though, consider consulting a financial advisor to ensure your strategy aligns with your goals and risk tolerance. 

7. Focus on the long term

While it’s natural to get discouraged by the prospect of lower returns on your savings, remember that saving is a long-term game. The most successful savers focus on being frugal wherever and whenever possible to funnel as much money as possible into savings and investments.

Building wealth can be a slow and steady process. While an extra percent or two of interest is great when you can get it, even modest savings contributions can snowball into an impressive sum over time. Stay focused on your big-picture, long-term goals, and recognize that many setbacks are temporary.

Though declining interest rates might be discouraging for savers, they don’t need to derail your plans. By saving consistently, comparison shopping for the best interest yields, and taking advantage of tools and strategies to maximize your savings, you can keep your balances moving in the right direction. And with a solid savings cushion, you’ll be positioned to withstand whatever future changes the economic landscape might bring.

With a competitive Average Percentage Yield (APY), no monthly maintenance fees, and a leading mobile app, a Discover Online Savings Account makes it easy to grow your savings and manage your money on the go.

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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.