The Fed is likely to cut interest rates next week – 3 smart steps to protect your savings

What could next week’s Fed rate cut mean for your money?

The Federal Reserve is expected to cut interest rates for the third time this year next week, following quarter-point cuts in both September and October. Markets are currently pricing in better than 85% odds for another quarter-point move on Wednesday.

This is important for savers because the interest rates that banks and credit unions pay on savings accounts and certificates of deposit are tied to what the Federal Reserve does with its benchmark interest rate. As a result, deposit yields are likely to decline in the coming weeks.

However, today’s prices remain attractive by historical standards. After the central bank pushed its benchmark interest rate to a 23-year high in 2023 and kept it at that level for 14 months, yields on savings and certificates of deposit rose to record levels — some exceeding 6%. Even with three cuts this year, many accounts are still offering returns in the average 4% range.

While you can’t avoid lower returns in the future, you can He can Take steps now — and build smart habits going forward — to make sure your money continues to perform at its maximum potential, whatever conditions the environment brings.

With prices falling, these two simple habits can help you earn more

The rates that banks pay on high-yield savings accounts closely track the movements of the Federal Reserve. With one or more cuts expected this year, most savings rates will drift downward. The speed of their fall depends on the institution: some reduce revenues in one step, while others reduce them gradually.

Unfortunately, you can’t stop your rate from falling. Savings accounts are variable interest rate products, and banks can adjust the APY at any time – without notice.

But there are smart habits that can help you maximize your profit, regardless of what happens with broader interest rates.

• Habit #1: Regularly check your savings account APY. The current rate will usually appear in your online banking or app, often under Account Details. It may also appear on your statement, or you can call or chat with your bank to confirm. Staying on top of your APY ensures you’re not months behind on a big drop.
• Habit #2: Shop the market if your price drops too low. If your bank reduces your APY significantly, switching banks could mean making more money elsewhere. Our daily ranking of the best high-yield savings accounts makes comparison easy. With wire transfers, moving money from your account to a new bank is generally quick and easy.

These two habits can help you make the most of low savings rates, but you can’t lock If returns are higher today for a longer period, you’ll need a different type of account.

Another smart move: lock in a higher APY before rates drop further

When the APY is high and you want to secure it for a longer period, CDs are one of the most effective tools. The price you book is guaranteed for the duration, whether that’s 3 short months or 5 long years. No matter how much or how quickly the Fed lowers interest rates, your CD yield will not change.

With a Federal Reserve rate cut expected this week, time is short if you want to capture the highest returns today. Our ranking of the best CDs nationwide highlights 15 options that pay 4.15% to 4.50% with terms ranging from 4 to 19 months. You can also explore our ratings for each term for more options, especially if you want a longer price guarantee.

Just choose your CD term carefully, as you’ll face an early withdrawal penalty if you need to cash out before the due date. It’s also a good idea to keep a reserve in a high-yield savings account so you can cover unexpected expenses without breaking your CD.