2 Reasons I'm Not Chasing a Higher Rate on My Savings

We like savings accounts a lot here at The Ascent, and with good reason. Having cash savings can help you fund big purchases as well as sleep better at night, as building an emergency fund is one of the best things you can do for your personal finances. Plus, the best savings accounts available as of this writing are paying upward of 5% APY (annual percentage yield -- how much money you can earn from interest in a year). That's pretty great, especially when you consider that the average APY on a savings account is currently just 0.46%.

My own high-yield savings account is currently paying me 4.35% on my saved cash. I could switch accounts (it's pretty easy to do so) and earn a higher APY -- but I'm not interested. Here's why.

1. I really like my account's features

It's probably silly to feel affection for a financial product, but I think I'm among friends here. So I'll say it: I really, really like my savings account. It's with an online-only bank, and these banks come with some pretty sweet features. Since they don't have physical branches, they have lower overhead costs, which makes those higher APYs possible. It also means that online banks can invest more in their web-based spaces, such as their web-banking portals and mobile apps.

My bank's mobile app is clear and easy to use, and even creates graphs showing my savings growth over time. I can deposit checks, transfer money, and check out my account statements in the app. But my favorite feature of this account is far and away the 30 sub-accounts I can create to further section out my savings.

I have one devoted to my quarterly tax payments (boring but necessary, since I'm a freelancer), but others where I'm saving to buy a home this year, travel, and even cover costs for a big dental procedure I have coming up. I can set goals for individual funds, and I even get congratulatory emails from the bank when I meet a savings goal. Getting this kind of positive reinforcement makes saving more fun.

2. Savings account rates are variable

So here's the dirty little secret of these high APYs on savings accounts: They aren't forever. Savings account interest rates are variable and subject to change at any time. This means they're generally tied to the whims of the economy at large, and specifically whether we're in a low or high interest rate environment.

We are currently in the latter, thanks to a series of 11 Federal Reserve rate hikes intended to deal with skyrocketing inflation in the wake of COVID-19. According to the most recent Consumer Price Index Summary report, we are currently sitting at 3.1% inflation year over year, a far cry from the 9.1% we saw in June 2022. So we can surmise that the rate hikes have had their intended effect.

It's important to note that the Federal Reserve doesn't set consumer rates -- those are set by banks and other lenders. But when the federal funds rate (the rate at which banks lend each other money) is higher, it's usually a sure bet that consumer rates will rise, too. Currently, it's more expensive to borrow money (such as in the form of a personal loan), but if you've got money in savings, you can earn a higher rate on it -- for now.

Since the APY I'm currently earning on my savings account isn't permanent, it would be silly for me to keep jumping ship in search of a higher rate that is just going to come back down. Rate cuts are predicted for 2024, and when it happens, I'll likely see my APY drop. But since I like the account anyway, I'm planning to keep it open and look back wistfully on the salad days of earning 4.35% on my saved cash.

If you're like the 31% of Americans (according to research from The Ascent) currently earning a savings account APY of 4% or better, enjoy it while it lasts. There's never been a better time to optimize your savings this way, so if you're instead part of the 69% who don't have this kind of account -- what are you waiting for?