The 2-Step Strategy to Earn More on Your Savings—No Matter What the Fed Does This Fall

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Why the Fed’s Next Move Matters for Savers

The Federal Reserve’s interest rate decisions are hotly anticipated for a reason: they directly impact the cost of borrowing money, firstly among banks and then indirectly to the rest of the population. For savers, the positive outcome is higher interest rates on their savings. When money is more expensive to access, banks and credit unions—which need customer deposits in order to lend money—offer higher rewards to park your money with them.

Right now, the opposite is happening. The Fed cut its benchmark rate in mid-September by a quarter percentage point. And judging by its latest quarterly “dot plot” forecast, policymakers expect another half-point reduction by the end of 2025.

Fortunately, the Fed’s recent cut didn’t make big waves in interest rates this past week—in large part because banks and credit unions had been anticipating the minor reduction for weeks already. As a result, today’s top yields are still sitting high and are among or near the best savers have had access to in decades.

It’s probably a good idea to take advantage of that while there’s still time. The best strategy to maximize your savings and avoid the stress of trying to constantly guess the Fed’s next step is to park cash you might need soon in a top-paying high-yield savings account, and put funds you can live without for a while in a certificate of deposit. CDs let you lock in today’s great rates for a set term, no matter whether broader interest rates fall.

Step 1: Keep Cash Accessible in a High-Yield Savings Account

Any cash you could need in the short term for emergencies or planned expenses should be placed somewhere it can be easily accessed without withdrawal penalties and the risk of dropping in value. For these needs, high-yield savings accounts tick the most boxes.

These accounts usually:

• Earn much more than traditional savings accounts
• Are easy to open
• Let you access your money penalty-free whenever you need to
• Are insured up to $250,000 per depositor, per bank/credit union

The most obvious downside of high-yield savings accounts is that the returns they pay are variable and subject to change. One minute your bank or credit union could be paying you 4% on your balance. The next, much less. That’s the price you pay for easy access.

As of Sept. 29, it’s a great time to have money sitting in a high-yield account. Our daily ranking of the best high-yield savings accounts includes more than a dozen options above 4.30% APY, many with no minimums, fees, or special requirements.

Consensus among observers of the Federal Open Market Committee is that these rates will move lower toward the end of the year. But even if they slip, high-yield accounts will still likely deliver more than you can get elsewhere for this level of liquidity.

Step 2: Lock In Top Rates With CDs Before They Drop

There’s also a way to lock in today’s historically impressive payouts for months—or even years.

Unlike savings or checking accounts, a CD offers a guaranteed return until maturity. The catch is that during that timeframe, which can range from a few months to several years, your money is theoretically untouchable. If you tap into your CD before your chosen term ends, you’ll trigger an early withdrawal penalty, which typically takes the form of forfeiting some of the interest you’ve earned. That erodes your return.

The best CDs offer 4.35% to 4.60% APY on terms from 3 to 12 months (as of Sept. 29). Alternatively, if you prefer to lock your money away for longer at a fixed rate, meaning anywhere from 18 months to five years, the best offers today are in the lower-4% range.

Speculation that these rates will soon drop, and even that another decade of low borrowing costs could be around the corner, might tempt you to throw all your savings in the CD offering the longest attractive fixed rate. But think before acting. There’s no guarantee that the Federal Reserve will keep lowering rates. And even if more Fed cuts arrive soon, the returns on savings accounts won’t suddenly drop off a cliff. Instead, the rate decline will most likely be gradual. It’s also crucial that you don’t deposit money in a CD that you may need before the certificate’s maturity date.

Why Combining the Two Is a Smart Strategy Right Now

For savers who may need their money within five years—a horizon that’s generally considered too short for investing in the stock market—a smart option right now is pairing a high-paying CD with a high-yield savings account.

With this strategy, you get the best of both worlds: A guaranteed attractive return—especially considering today’s high rates—and easy accessibility. The CD enables you to lock in historically high rates for months or years, while the high-yield account gives you the best possible return on cash you’re allowed to withdraw without penalty.

Splitting your savings also offers a hedge against uncertainty. Nobody really knows whether the Fed’s next conclave will produce a rate cut and, if it does, how big. By allocating your savings to two buckets, the pressure of having to predict future rates is eased. If APYs fall, your CD will pay off nicely and hopefully offset the impact of lower returns on high-yield accounts. Conversely, if rates rise, or don’t drop as expected, your high-yield savings balance will continue to reap benefits.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts 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. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. 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.