Why You Should Stick to Your High-Yield Savings Account -- Even in a Shaky Economy

Annual percentage yields for savings rates have been over 4% for a few months now, and that's not expected to change after Wednesday's Federal Reserve meeting. Usually, banks move in the same direction as the Fed's decision to lower, raise or hold its federal funds rate. However, we've seen small dips lately across some high-yield savings accounts, and some are already at 3.70% APY and lower. 

The Fed's goal is taming inflation, which is showing signs of cooling. But now experts are concerned about tariffs' impact on inflation and the possibility of a recession this year. Tariffs could drive inflation and prices back up. And even though these economic moves are out of your control, it's important to keep an eye on what they mean for your savings account. 

Here's how your savings account can help you protect your money from economic changes -- and what you can do now. 

Experts say savings rates will hold steady for now

You shouldn't expect major changes overnight, but savings rates will continue to fall throughout the year. Experts predict that the Fed will hold rates steady on Wednesday, which means some banks could do the same. Northwestern Mutual financial advisor Nisu Patel says that if the Fed cuts rates, it will be gradual like last year's 0.25% reductions. 

As a result, Patel thinks we'll continue to see high-yield savings rates hold steady for the next three to six months, with small changes. However, there's still a chance savings rates could be impacted by policy changes or economic downturns that could come later this year -- including higher inflation and the possibility of a recession.

Patel pointed out that inflation is not only a driving factor to the Fed's policies. It's also a major concern for your short- and long-term goals. Higher prices from inflation and tariffs could affect how much you're able to stash and keep in your high-yield savings account, especially if you're worried about how any economic changes will impact your money. 

Certified financial planner Bobbi Rebell agrees. "Fear does drive financial decisions even if it shouldn't. It is a natural human emotion to want to scale back on risk, and that, in turn, would drive consumers to put more money into savings," said Rebell. 

If you're worried about having enough money set aside in case of an economic downturn, the interest you'll earn from a high-yield savings account can help add more to what you're already saving. Plus, sticking to high-yield savings accounts enables you to earn interest on your short-term savings and keep your money easily accessible in case you need it.  

Don't settle for a lower savings APY without comparing rates first 

If inflation continues to cool, banks may lower savings rates, which means you'll earn less on the money you're setting aside. But there are several factors to consider beyond this, including a bank's deposit goals and how closely related the Fed really is to a bank's savings rates.

"While the Fed's policy expectations are a key signal regarding interest rate trends, it is important to remember that the Fed funds rate and the rate that banks pay consumers on products like savings accounts are not directly linked," said Rebell. 

The average savings rate is 4.08% APY based on CNET's weekly tracking. However, Rebell says it's best to shop around if you want the best rate because rates can vary from bank to bank.

For example, a bank may offer a higher savings rate if it wants to attract more customers and their deposits.  A bank with ample funding to handle its business may not feel the need to attract more deposits and may not pay a competitive interest rate on its savings accounts, Rebell said. 

If you're worried about savings rates falling, experts recommend treasury bills, I bonds and certificates of deposit -- which all offer a guaranteed rate. However, there are withdrawal limitations. For example, you cannot withdraw from an I bond until you've had it for one year, and CDs charge early withdrawal penalties if you take money out before the term ends.

Don't stop saving 

There's plenty of uncertainty around how inflation and tariffs will impact your wallet and ability to save. 

The possibility of a recession can influence how people allocate their money and prioritize savings goals, Rebell said. You may be worried about job security or squeezing more out of your budget to afford everyday essentials. 

Every deposit into your high-yield savings account earns interest, which can help you offset costs or put more toward your emergency fund. Maximize your interest earnings while there's still time. Even if you contribute less toward savings than before, remember that you'll earn more interest as your savings balance grows.