‘Yields last seen in 2009.’ Here’s what you should be earning on a savings account now, but probably aren’t

While the average savings account is still paying a mediocre rate (see below), some high-yield savings accounts are now paying more than they have in a decade. “With interest rates rising, the most competitive savings accounts offer yields last seen in 2009 and they continue to climb,” says Greg McBride, chief financial analyst at Bankrate. You’ll find a number of accounts now paying 3% or more, and you can see the highest savings account rates you may get now here.

Today’s savings rates

Below are the latest average rates on savings accounts and CDs, according to data from Bankrate released on December 7, and then we chat with experts about how much you should be saving (yes, even in this high-inflation environment), where to put the money, and more. 

How much do you need in savings?

Pros differ on exactly how much, but as a rough rule of thumb, plan to sock away anywhere from 3-12 months of essential income in an emergency fund. Your age, marital status and career are all factors in how much emergency savings you need.

“Married couples still in their careers want between 3-6 months of savings, but likely closer to six if the income is lopsided,” says certified financial planner Curtis Crossland of Suttle Crossland Wealth Advisors. Some experts advise having 12 months of emergency savings, but that may be considered excessive for some. “It may only be appropriate if you’re looking to switch careers and you expect to be unemployed for a few months,” says Alvin Carlos, certified financial planner at District Capital Management. 

Outside of an emergency fund, you may also want to save for short-term goals, like if you want to buy say a home in the next six months or want to go on a vacation. 

See the highest savings account rates you may get now here.

Where to put your money: Savings account, MMA vs CDs

Put your emergency fund money somewhere safe, like a high-yield savings account, money market account or a CD. 

The big perks of savings accounts are flexibility, ease of saving, earning interest and knowing your money is protected. But there can be drawbacks of having your money in high-yield savings accounts too. There are often withdrawal limits that incur fees when you’ve exceeded the number of withdrawals in a month, and they’re not ideal for the long term because they may not pay as much interest as other savings vehicles. See the highest savings account rates you may get now here.

For risk-averse investors or anyone only looking to invest money for the short-term, CDs can be useful in terms of protecting principal, while still allowing for a little bit of interest to be earned. Indeed, CDs typically offer better interest rates than savings accounts. It’s important to keep in mind however, that putting money into a CD really only makes sense if you’re able to keep it there until it reaches maturity, which is typically between a few months and five years — otherwise you’ll be on the hook for a hefty penalty. If you’re saving with a specific goal in mind, a CD is often one of the best savings tactics as you’re guaranteed to earn a return.

Money market accounts (MMAs) are savings accounts that have debiting and check-writing abilities accompanied by higher interest rates than traditional savings accounts. MMAs frequently have higher minimum balance requirements and usually have subpar interest rates compared to high-yield savings accounts. If having the option to spend directly from a savings account is something that’s important for you, a MMA offers decent rates with the flexibility of writing checks or using a debit card attached to the account.

What to know before opening an MMA or savings account or purchasing a CD

Before opening a savings account, you’ll want to make sure you have the protection of federal deposit insurance, that you’re able to meet any balance or other requirements to avoid any monthly fees and that you can easily get money into and out of the account when needed. “Often, linking the account to the checking account at your current bank or credit union is an easy way to move money back and forth,” says McBride. (See the highest savings account rates you may get now here.)

Before getting a CD, ensure that you understand the terms of the deposit and that you’re okay with not being able to touch your money for whatever fixed time period you’ve agreed upon. It’s also important to familiarize yourself with the early withdrawal penalty fee in case you find yourself needing to withdraw funds before the CD matures.

Before opening a MMA, make sure you’re able to meet the minimum balance an other requirements. You should also compare the interest rate with that of a traditional savings account and a high-yield savings account to make sure you’re getting the most bang for your buck.

The future of savings rates

With more rate hikes potentially looming on the horizon, savers can expect an improvement in returns for savings accounts and CDs, particularly at online banks, smaller community banks and credit unions. “The outlook for additional rate hikes is a promising one for savers, especially at the point we start to see a retreat in inflation,’ says McBride.