Where to get the best rates on your savings amid rising inflation

Consumers are likely taking a sticker shock, as new government data shows annual inflation is rising at the fastest rate in more than 30 years.

So-called headline inflation, including food and energy prices, rose at an annual rate of 4.4% in September, the fastest since 1991. With higher prices likely to stick around for the year. Now and with interest rates still low, inflation may also be easing. another important area for consumers: their emergency savings.

Therefore, you may want to re-evaluate where your money is deposited. While it can be tempting to look for higher returns, it’s always best to take a cautious approach.

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“With money, if it’s for something like an emergency fund or a short-term expense, it needs to be kept safe,” said Ken Tumin, founder and editor of DepositAccounts.com . “Stocks, bitcoin or other types of investments are not suitable for this.”

There are usually a handful of options for emergency funds. Each offers potential advantages and disadvantages.

Online Accounts

If you want to keep it simple, an online savings or checking account may be the best bet, Tumin said.

“By being liquid, you always have the flexibility to move it if the rate drops or you find a better rate elsewhere,” which is especially important if you’re worried about inflation, Tumin said.

High yield chequing accounts

Many U.S. banks and credit unions currently offer high yield checking accounts, according to Tumin.

Some of them offer accounts that pay at least 3% interest on deposits of up to $ 10,000.

This beats the average savings account, which can have interest rates as low as 0.14%.

Like other accounts, these often come with certain conditions, such as regular use of a debit card.

Still, there are other potential benefits, such as no monthly fees or 2% cash back up to $ 200 in purchases per month, for example.

Savings bonds

Investing in I bonds offers a particular advantage in today’s environment because they are indexed to inflation, according to Tumin.

Unlike some other investments, I Bonds allow you to defer federal taxes on silver until you redeem them or they reach their 30-year maturity.

However, there are some tradeoffs. One downside is that you are limited on how much you can invest per year, which is currently $ 10,000.

You also cannot redeem the money within the first 12 months from the date of issue. If you withdraw the money in the first five years, you could lose three months of interest. However, this exceeds the early withdrawal penalties for certain five-year certificates of deposit, which can represent at least six months of interest, Tumin noted.

Certificates of deposit

Generally, now is not the best time to invest in CDs, Tumin said, due to the fact that their rates are currently at their lowest. If you invest now, you could lock in that rate for the long term.

This could lead to regrets if interest rates go up over the next couple of years.

Another thing to watch out for with CDs: severe early withdrawal penalties. However, a dozen online banks are now offering CDs that won’t penalize you for withdrawing your money too early, Tumin said.

Therefore, it may pay off to shop around.

“The only reason to get a CD would be if you could get a lot more than you can at the rate of a savings account,” Tumin said.

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