Fed says interest rates poised to go ‘higher than previously anticipated.’ Here’s a simple way to profit from that

“Higher returns on savings will be a likely outcome until the battle on inflation is won,” says Mark Hamrick, senior economic analyst and Washington bureau chief for Bankrate.com. We’re already seeing some of that too, with many savings accounts and CDs paying upwards of 4.3%-4.5%.

Savings rates continue to rise

The average annual percentage yield, or APY, on high-yield savings accounts and CDs has continued to increase alongside the rising Fed funds rate. Although the average interest rate on savings accounts is low, some high-yield savings accounts these days are offering rates not seen in decades. 

Here are three with rates of at least 5% APY: 

• Consumers Credit Union, Free Rewards Checking: 5.00% APY
  • Balances up to $10,000 are eligible for one of the highest available rates in the high-yield savings market today with this high-yield checking account from Consumers Credit Union. What sets this apart from many of the high-yield savings accounts out there is its access to 30,000 ATMs and 5,000 shared branches across the country. Write unlimited checks, and take advantage of online features 
• Varo Savings Account: 5.00% APY
  • Make the required $1,000 in electronic deposits for your paycheck, pension or government benefits from your employer or government agency, end the month with a positive balance in both a Varo bank account and savings account, and you’re eligible. But be sure to read the details: balances that don’t meet the requirements and those over $5,000 only earn 3% APY. 
• Centier Bank, Connect Savings: 5.00% APY
  • Link your checking and savings account to qualify for this savings rate. Just be sure to make the minimum deposits and follow the steps in the fine print. 

And although the average fixed 12-month CD rate is just 1.36%, competition from banks and credit unions have pushed that higher as well. Here are some of the highest available CD rates today (Check out the full list here): 

• Mountain America Credit Union: 5.25% – 5.35% APY for 12-month CDs
  • Make the $500 minimum balance requirement and earn 5.25% APY for this 12-month CD. For youth accounts — designed for children and young adults — the rate is even more. Just make the minimum account opening and balance requirement and earn 5.35% APY. With that higher rate comes a few additional restrictions: the annual deposit limit is $10,000 through the age of 27 with a maximum of $100,000 per any one account. Early withdrawal penalties and fees here do apply.
• SELCO Community Credit Union: 5.25% – 5.5% APY​ for 9-month CDs
  • To qualify for this 5.25% APY rate attached to the 9-month Accelerator CD, you’ll need to maintain a balance of $25,000 to $99,999 in new funds. For an even higher rate of 5.5% with the credit union’s so-called Jumbo Accelerator CD, you’ll need an opening balance of $100,000 or more. If the rate on either CD increases within the first 30 days, SELCO will adjust to match.
• Fulbright: 5.25% APY for a 12-month CD
  • Make the minimum $1,000 account opening requirement and earn 5.25% APY on this 12-month CD. Just be sure not to withdraw early and maintain your balance requirements. 

While those are indeed high, Nicholas Bunio, a certified financial planner with Retirement Wealth Advisors, says Fed’s anticipated rise in interest rates could mark an even bigger buying opportunity for long-term investments in the year ahead.

“Just because rates rise and push stocks and bonds down, that could be a buying opportunity for long-term investments,” Bunio says, adding that he thinks “rates on CDs and savings accounts will continue to increase and could be a good place to park extra cash.”

How to save amid high inflation?

In the past 12 months, consumer prices — including everything from food, gas, car prices and shelter — have increased by a combined 6.4%, according to government data. “Inflation has affected so many parts of the consumer market,” says Julie Ramhold, consumer analyst with DealNews.com — including everything from gas to eggs to hotels to furniture. To be sure, food prices are up 10.1%, new vehicle prices are up 5.8% and the price of clothing as a category is up 3.1% over the past year.

Needless to say, finding wiggle room to build a savings account has become more difficult. As many as 35% of U.S. adults carry credit card debt month to month, a recent Bankrate survey found. What’s more, 68% of survey takers in a recent Bankrate survey said they wouldn’t be able to cover their living expenses for a month if they lost their job today. 

Because consumers are feeling the pressure, Hamrick says it’s even more critical to look for the highest available rates to park any cash you’re able to set aside. “Consistent with the benefit of shopping around for the best rates,” Hamrick says it’s advised to “avoid taking the first offer or option with respect to a savings product.”  

Bunio adds that it’s also critical to ensure any bank or credit union you use for your savings or CD investment is insured. “One should be aware of the FDIC insurance protection,” Bunio says. “If a bank goes bankrupt, the federal government insures you up to $250,000 of money, per bank.”