This Could Make Your Savings Account Worthless in 2023

Your savings may be slowly losing their value.

Until we were well into 2022, savings account interest rates weren't really much to write home about. In fact, there was an extended period of time when many banks were paying under 1% annual interest on products like savings accounts and certificates of deposit. 

But after series of aggressive interest rate hikes by the Federal Reserve, banks started paying more generously last year. Granted, at the same time, borrowing rates started to rise for consumer products like credit cards and personal loans. So the news wasn't all rosy. Still, savers finally had a chance to earn a decent return on the cash they were keeping in the bank.

Meanwhile, these days, you might manage to earn upward of 4% interest in a high-yield savings account. Seeing as how that's a risk-free return, that's a pretty sweet deal.

But you'll need to keep tabs on the interest rate your bank is paying this year. And you'll also need to track interest rates in general. You don't want to leave your money to lose value to inflation in a savings account that isn't giving you the return you're after. 

A low interest rate could make your savings account far less valuable

It always pays to keep some money in the bank. A savings account is the best place for your emergency fund -- cash you need on hand in case your car breaks down, your home needs repairs, or you find yourself out of a job. 

But you may want to limit the amount of cash you keep in a savings account during periods when interest rates are low. And if you currently have more cash in your savings account than you need for your emergency fund, you may want to move some of that money out of the bank if interest rates plunge later in 2023. Otherwise, you could end up missing out on the higher returns that cash could earn elsewhere. 

In fact, even with savings accounts paying fairly generously today, it could still pay to move some of your extra cash out of savings and into a brokerage account. You might manage to generate twice the return or more by investing your money rather than having it sit in savings. 

Granted, any time you invest money, you take on risk. With a savings account, you take assume no risk so long as your bank is FDIC-insured (and you haven't socked away more than $250,000). But if interest rates plummet this year, moving some money out of savings could be a good bet.

Pay attention to interest rates

Savings account rates can fluctuate over time, so it's important to keep tabs on them. Banks may very well continue to pay generously for the remainder of 2023. But you'll need to keep an eye out for a notable decrease in interest rates -- and prepare to act accordingly so you don't lose out.