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What does a Fed Rate increase in 2023 will mean for Savings Accounts
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What does a Fed Rate increase in 2023 mean for savings Accounts
The rates of interest for high yield savings accounts in 2023 could continue to increase, though not as quickly or as fast as the year before.
By Margarette Burnette Senior Writer Savings accounts, money market accounts, banking Margarette Burnette is a savings expert who has written about bank accounts from before even the Great Recession. Her work has been published in major newspapers. Prior to becoming a part of NerdWallet, Margarette was a freelance journalist who had bylines in magazines such as Good Housekeeping, and Parenting. Margarette is located near Atlanta, Georgia.
Updated Mar 22, 2023
Written by Yuliya Goldshteyn Assistant Assigning Editor Yuliya Goldshteyn works as a banking editor at NerdWallet. She has previously worked as an editor, a researcher and writer in a variety of industries, from health care and market research. She graduated with a bachelor's degree in the field of history at the University of California, Berkeley and a master's degree in social sciences from the University of Chicago, with a focus on Soviet culture and history. She is based within Portland, Oregon.
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It's 2023, and there's a new Federal Reserve rate increase. Federal Reserve just announced its second Federal Funds Rate range hike of 0.25 percent. This follows seven rate hikes in 2022. The new goal, which is a range that ranges from 4.75 percent to 5%. This increase is smaller than some of the dramatic changes that will take place in 2022. However, the increase also means that rates are at their highest point since 2006.
The recent rate hikes mean loans as well as credit card debt have become more expensive. But if you have an account for savings or a certificates of deposit you could profit. Here's a look at what the most recent rate hike could mean for savings accounts in 2023.
Savings rates in 2023: 4% APY or higher
In early 2022, some of the top savings accounts had a 0.50 percent annual percent yield. These days, the most effective savings accounts are .
It's an impressive jump for just one year. As the latest federal funds rate increase from the is smaller compared to the majority of 2022 rate bumps and you shouldn't anticipate to see APYs that are almost 8 times more. However, you may still see yields that edge slightly higher, and include more accounts that reach the 4% mark.
Pay attention to high-yielding savings accounts online particularly, as they tend to have the most lucrative rates.
On the other hand, savings accounts in a small number of the nation's largest banks have rates of 0.01 percent, despite numerous federal fund rate hikes this year. The rates are lower than the average national savings rate of 0.37 percent as of March 20 in 2023. This is according to the Federal Deposit Insurance Corp.
If you have a savings or checking account that has a low rate, it might be worth your effort to shop around for a savings account that earns 3%-4% APY.
Shore up savings for the future
One of the reasons the Federal Reserve has been increasing rates is due to its desire to combat inflation. Based on the U.S. Bureau of Labor Statistics CPI, which is the measure of consumer prices that is commonly used as a measure of inflation, increased 6.0 percent over the course of the year in February 2023. That figure, while relatively excessive compared to the previous years, is lower than what it was in June 2022, when CPI was 9.1 percent higher year over year.
This is a good reason to build up an in a high-yield account now. No one can predict the future however having a solid savings account can prepare you to weather a financial storm.
It's ideal to have 3 to 6 months' worth your expenses saved up However, that's a significant amount. If you don't have that much in savings, you can accumulate it over time in amounts that work for you.
Imagine you receive a check every two weeks and can save $50 each payday. You'll have more than $600 saved up within six months. This could be a great help in an emergency situation. Putting that cash in an account with a higher rate could help you build your money.
The difference that a high yield savings account brings
The place you store your savings could affect your balance. If you placed your emergency fund of $600 into a savings account that earns a 0.01 percent APY similar to that offered by many of the biggest national banks, and did not make any additional deposits, the account would earn a total of only 6 cents over the course of a year. But if that money was stored in a savings account with a high yield with a 4.00% APY even if you did not deposit any more money, the balance would grow by more than $24 in the same time. That's a gain for simply choosing a better savings account.
Check out how APYs have changed on high yield accounts in comparison to normal accounts.
March 2023
February 2023
January 2023
December 2022
November 2022
October 2022
September 2022
August 2022
Online institutions
, Member FDIC.
3.40% APY.
3.40% APY.
3.30% APY.
3.30% APY.
3.00% APY.
2.35% APY.
1.85% APY.
1.85% APY.
Member FDIC.
4.05% APY.
4.05% APY.
4.05% APY.
3.85% APY.
3.60% APY.
3.00% APY.
2.10% APY.
2.10% APY.
, Member FDIC.
4.00% APY.
4.00% APY.
4.00% APY.
3.60% APY.
3.25% APY.
3.12% APY.
2.07% APY.
2.07% APY.
National brick-and-mortar bank
, Member FDIC.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
, Member FDIC.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
0.01% APY.
You can try your own calculations with NerdWallet to see what your savings can earn.
Fed rate hikes are expected to continue into 2023 -- so far. Take advantage by storing your funds in a high-yield savings account. You'll earn higher rates than you would with a normal savings account, and will be more prepared for whatever financial situations come your way.
About the author: Margarette Burnette is a savings account specialist at NerdWallet. Her work has been featured on USA Today and The Associated Press.
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