17 high-yield savings accounts that outpace inflation right now (2024)

FAQs

Do high-yield savings accounts outpace inflation? ›

Good news for savers: interest rates on high-yield savings accounts and CDs are beating inflation. For years, those who wanted to keep their cash safe and accessible were in a predicament. Savings accounts and CDs, even the best of them, paid interest rates below the rate of inflation.

Which bank gives 7% interest on a savings account? There are not any banks offering 7% interest on a savings account right now. However, two financial institutions are paying at least 7% APY on checking accounts: Landmark Credit Union Premium Checking Account, and OnPath Rewards High-Yield Checking.

High-yield savings accounts earn you more money than brick-and-mortar bank accounts do. But often, you still won't earn enough to keep up with inflation. Even though your account balance rises, your buying power decreases.

The highest high-yield savings account rates today are offered by First Community Bank (6.00%), MyBankingDirect.com (5.45%), and Sovereign Bank (5.40%). These, along with our picks for the best high-yield savings accounts, offer rates at least 10 times the national average savings rate of 0.90%.

The Bottom Line. If you're wondering where to put your money in a recession, consider a high-yield savings account, money market account, CD or bonds. They can provide safe places to store some of your savings.

Impact on Savings and Investments

This means that while your savings might grow nominally, they lose purchasing power over time. For example, if the inflation rate is at 3% and your savings account offers a 1% interest rate, your savings are effectively eroding in value.

As of July 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

Varo Savings Account

Varo Bank is an online-only bank designed for on-the-go users with a highly-rated mobile app and a large ATM network. Varo High-Yield Savings Account customers earn 3.00% APY without charging a monthly fee and up to 5.00% APY by meeting specific requirements each month.

While the principal in your high-yield savings account won't fluctuate with the stock market, you can lose money if the bank charges high fees or fails to maintain the minimum balance.

What is the downside to a high-yield savings account? ›

Potential Drawbacks of High-Yield Savings Accounts

They are savings accounts, so they can prove limited in how much they earn over time. They may not be a substitute for riskier investment accounts or relied on solely for larger goals like retirement.

Millionaires Like High-Yield Savings, but Not as Much as Other Accounts. Usually offering significantly more interest than a traditional savings account, high-yield savings accounts have blown up in popularity among everyone, including millionaires.

Although each financial situation is unique, it doesn't typically make sense for you to keep all of your money in a high-yield savings account. After all, most high-yield savings accounts limit withdrawals to only six per month, so a checking account is typically a better place to store your spending cash.

Gaines reiterates that even most high-yield savings accounts lose value to inflation over time. “More than two months' worth of living expenses in a savings account is too much given the ability to earn around 5% from easily accessible money market accounts that should not fluctuate in price.”

For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.

There's no sure way to protect your money from the effects of inflation. The only rule is that cash savings accounts are generally not the best places to put your money long term – the interest is almost always lower than inflation, so your buying power is reduced.

If the (nominal) interest rate of the savings is higher than inflation, the real interest rate is positive and the purchasing power of your savings increases. If the (nominal) interest rate of the savings is lower than inflation, the real interest rate is negative and the purchasing power of your savings decreases.

The actual rate of interest for an I bond is calculated from the fixed rate and the inflation rate. The combined rate changes every 6 months. It can go up or down. I bonds protect you from inflation because when inflation increases, the combined rate increases.

Several asset classes perform well in inflationary environments. Tangible assets, like real estate and commodities, have historically been seen as inflation hedges. Some specialized securities can maintain a portfolio's buying power, including certain sector stocks, inflation-indexed bonds, and securitized debt.