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3 money moves to make while rates are high

It's a good idea to keep 3-6 months' expenses in a high-yield savings account to use for unexpected emergencies.  Getty Images

The Fed's most recent interest rate hike took federal interest rates higher than they've been in over two decades — at a target range of 5.25% to 5.50%. 

With over a year of increasing rates, you're probably feeling many of the effects, including higher costs to borrow money with loans and lines of credit. But there's also a silver lining Americans can benefit from today: increased savings earnings.

Finding balance in an uncertain economy can be difficult, but you can make the most of today's interest rates by taking the right actions to minimize costs while using higher rates for your own gains.

Start by comparing some top high-yield savings options available now.

3 money moves to make while rates are high

Here are moves you can make while interest rates are still high to work toward your financial goals.

Build your emergency fund

If you don't already have a fully-stocked emergency fund, now is the time to start saving. With savings accounts rates as high as they are today, interest can help you reach your savings goal faster.

Michelle M. Vargas, CFP, president of Waymaker Financial Planning recommends you "always make sure that you have cash for emergencies equal to at least 6 months of your living expenses in a high-yield savings account."

Using a high-yield savings account can help guarantee that you have access to your money when you need it while also allowing regular contributions to increase your balance. And, of course, you'll benefit from high interest rates ranging upward of 4.5% to even 5% APY.

An emergency fund can help safeguard you against any unexpected expenses or income losses. Using your living expenses as a starting point is a good way to ensure you can make necessary payments even if a crisis hits. 

"You will sleep a lot better at night knowing that you have this taken care of!" Vargas says.

Start comparing high-yield savings account options and save more today.

Pay down your debt

Paying off existing debt is just as important as saving while rates are high.

"Now is the time to scale back and devise a plan to pay off debt, short-term pain that rewards you later," says Kay Dee Cole, CFP, founder of Clarity Wealth Development.

This can be especially important if your debt balances have variable interest rates like many credit cards do. As federal interest rates rise, it's likely that your interest rate is, too. That can cost you a lot more on your total payment over time.

"Do a debt inventory," says Andy Mardock, CFP, founder and president of ViviFi Planning. "List out all your debts, interest rates, monthly payments, and time left on the loans. It's painful, I know. But only with this information in-hand can a person strategize the best way to get out from under the weight of debt and be far less affected by what the FOMC decides to do — now and in the future."

Think about locking in a CD

High-yield savings accounts aren't your only option for making the most of high rates. Certificates of deposit (CDs) can also offer upward of 5% APY on your balances. You may even earn more than with a high-yield savings account, as some CD rates today reach as high as 5.25% to 5.35% APY.

However, you'll need to commit to locking in your savings for the full account term. That can be as low as three months with a short-term CD or as high as 10 years. CDs also require you to deposit your entire balance upfront, without the chance to make contributions over time. 

Short-term CDs may earn slightly higher yields today, if the interest rate is your top priority. But locking in a long-term CD could be a good way to preserve today's high rates, even when the interest rate environment changes in the future. Make sure to also look for details like the early withdrawal penalty, minimum deposit amount and how you access your funds when the CD term ends.

You can get started by comparing competitive CD rates here now.

The bottom line

Today's high rate environment may be adding some extra costs to your expenses, but there are still ways you can get ahead financially. Start by prioritizing paying down your existing debts and reevaluating your spending plan. Then, make sure to stock your emergency savings by using a high-yield savings account to boost your balance. And, consider whether your extra savings could fit in a high-earning CD for a specific length of time, so you can benefit from high rates as long as possible. 

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