I can't recommend this move highly enough
Yesterday's news made it an even smarter thing to do
Hi there, my friend.
Yesterday was a pretty exciting day in my world. I was quoted in the New York Times, USA Today, CNN and CNBC! Of course, I feel fortunate to say that I’ve been quoted in all of those media outlets many, many times over the years in my role as personal finance expert with LendingTree, but it isn’t often that it happens all in one day. It is always special when it does.
So why all the attention? It was all about the Federal Reserve, which announced at the end of its regular meeting yesterday that it chose not to make any changes to interest rates during this meeting, as most everyone expected.
Wait. They did nothing, which everyone already knew they would, and it was still a big deal? Whaaa?
Yeah, it is true. Even no news can be big news when it comes to the Fed. That’s because it has such a massive impact on Americans’ finances.
Why you should care that the Fed did nothing
If you want a full explanation of what the Fed does and why it matters so much, check out this more-or-less plain-English video from the Atlanta Fed. For this post, however, the most important thing to know is this…
The Fed has a huge influence on the interest rates people pay on credit cards, auto loans, mortgages and other types of loans, as well as the interest rates that people earn on savings accounts, CDs and other financial tools.
When the Fed raises or lowers rates, the interest rates people pay and earn tend to go up or down as well. For some types of loans, such as credit cards, it has a direct influence, pushing rates up or down quickly and relatively predictably. For other loans, such as mortgages, the influence is less direct and often less immediate, though rates tend to move in the same general direction as the Fed’s rates.
When rates go down, which happened several times late last year, it is good for borrowers (lower interest rates mean it is cheaper to borrow), but it isn’t so great for savers (lower rates mean smaller returns on savings). When they rise, which last happened in 2023, the reverse is generally true.
So what about days like yesterday, when nothing happens?
Again, it depends on whether you’re thinking as a borrower or a saver. Borrowers may not like the Fed standing pat, as it makes rates less likely to fall in the near future. However, savers might love it for the same reason.
For this post, I’m focusing primarily on savers. If you are one — or aspire to be one — there’s one move that you really need to make, and that move looks even smarter today than it did yesterday.
The move I can’t recommend highly enough, if you haven’t already done it
If you don’t already have one, it is time for you to look into an online high-yield savings account (HYSA). These accounts typically give significantly higher returns than you’ll find with traditional savings accounts from the big mega-banks — sometimes 4% or higher vs. just a fraction of a single percentage point — and they’re typically easy to set up.
These HYSAs had better returns a year or two ago, before the Fed started cutting rates, but they’re still leaps and bounds better than what you often find at traditional banks. They can absolutely turbocharge your emergency fund or savings for other goals. Consider this:
If you deposit $5,000 in a HYSA and leave it alone for 5 years at a rate of 3.75% — a good rate, but hardly the best available — you’ll earn $1,010.50 in interest.
Deposit that same $5,000 in a traditional savings account and leave it alone for 5 years at a rate of 0.5% — about the national average for a savings account, per DepositAccounts.com — you’ll take home just $126.26. (Note: These numbers were crunched using DepositAccounts.com’s simple savings calculator.)
That’s nearly an extra $900. Kind of a big deal.
I have a HYSA with Bask Bank and have been really pleased with my returns. However, they’re one of many, many HYSAs out there, and I strongly, strongly recommend you shop around for one if you haven’t already — or even if it has just been years since you last did. You can find rates and more information on countless savings accounts at DepositAccounts.com.
(Full disclosure: 1: I’m not getting paid by Bask Bank or anyone else to talk about them. I’m just honestly sharing the name of a company that I really do business with. 2: DepositAccounts.com is owned by LendingTree, the company I work for. )
In fact, getting a HYSA looks like a smarter move today than it was even a few days ago. That’s because the Fed is unlikely to reduce rates anytime soon, which means that HYSA rates are unlikely to fall much below today’s rates in the near future. That means better returns for longer, and who couldn’t benefit from that?
In case you missed them…
I’ve gotten wonderful feedback about the last two posts I’ve done, so I wanted to reshare them here, just in case you might’ve missed them.
The topics couldn’t be more different — the impact of war vs. cheesy lines to get hotel upgrades — but I think they both have something to offer.
Let me know what you think of them.
Lastly, happy birthday … to my book!
“Ask Questions, Save Money, Make More: How To Take Control Of Your Financial Life” turns two years old today!
I’ll never forget the day that it came out. I was in New York doing a media tour and going around to various bookstores in the city, signing copies of my book and just taking it all in. Here I am at the flagship Barnes & Noble on Fifth Avenue in New York…
To say that the book changed my life is a massive understatement. I’m so incredibly proud of it and the fact that the message it contains — you have way more power over your money than you realize — has had a very real impact on people. That message is perhaps even more important today than it was two years ago.
Whenever I’m traveling, I look for bookstores in the area and sign copies of my book if they have it in stock. Honestly, it never gets old. I can’t count how many times I’ve been to the B&Ns in New York, for example, and it is an adrenaline rush every time.
Thank you for your support. It means the world to me, and it motivates me to keep spreading the message that you really can pay less, earn more and keep more of your hard-earned money by asking the right questions in various everyday situations. I’m never going to stop talking about it.
Until next time!
Matt