Ask a Finance Whiz: How do I maximize my savings right now?

Here's what you need to know about saving money right now when it comes to interest rates and the pandemic economy.
"It feels like now is not the time to move money."
"It feels like now is not the time to move money."TODAY Illustration / Getty Images
/ Source: TMRW

Emily Pandise has covered business, tech and media for NBC News since 2017. In her early 20s, she realized she had no idea how to manage her money, so she set out to change her financial habits and learned a lot along the way. Now, she wants to help others do the same with this column, "Ask a Finance Whiz." You can find her on Twitter and Instagram at @emilypandise.

Have a question for Emily? Email us at tmrwadvice@nbcuni.com.

Hi Emily,

Here's a big Q I have — how am I supposed to maximize my savings these days? Interest rates are low, market is volatile, we're in an economic recession, pending election makes any investment risky, the list goes on. I hate to have my savings sitting in a traditional savings account without any growth, but it feels like now is not the time to move money.

Would love to know what the experts recommend for someone trying to plan for some shorter term (5 year) goals.

Thanks in advance!!!!

Aileen

$

Aileen,

I totally understand your concerns when it comes to moving money around, especially right now. One important thing you’re already thinking about is your time horizon — aka, when you need that money. For a short-term goal, you’ll want to keep it low risk. Fortunately, there are easy solutions here: a high-yield savings account, a CD or both.

High-yield savings accounts, or HYSAs, will give you a much higher interest rate than a traditional savings account. The latter averages around .05%, whereas HYSA can go much higher, sometimes up to 2%. Right now, that interest rate may be a little lower than usual because of the Fed’s recent rate cuts, but it will come back up in good time. And .6% is still a step up from .05%, right?

If you are completely sure you don’t need that money for a couple of years, a CD (or Certificate of Deposit account) could be another good option. You essentially lock your money away for a set amount of time, usually one to five years, in exchange for a better interest rate.

Compare the rates of different banks for both of these options to see what’s right for you (sites like Nerdwallet and Bankrate can help you do this side-by-side). Online-only banks are known for offering competitive interest rates, but big lenders may be an easier choice if you can directly connect it to your checking account, for example.

And it’s more than just an interest rate; you can shop around for perks like no minimum deposit, check options or an app. The only must-have for these accounts is FDIC insurance, which means your money will be protected if something goes wrong with the bank. That should be displayed prominently on the bank’s website.

Another perk of putting your money in a HYSA or CD is that you’ll be less tempted to spend it, especially if it’s separate from your checking account. It’s the best version of "out of sight, out of mind." At the end of the day, you want your money to be doing the most work for you possible and by picking a higher-interest option, you can do that with little risk.

Have a question for Emily? Email us at tmrwadvice@nbcuni.com.