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Why you should open a high-yield savings account this May

Earn a positive inflation adjusted return on your savings with a high-yield savings account now.  Getty Images

You never know when emergency expenses might pop up. And, when they do, you'll want a financial safety net to fall back on. But emergencies aren't the only reason you should save money. Have you thought about buying a home? What about taking a dream vacation or even getting married? Large expenses like these typically require months, if not years, of savings to cover

But saving money in today's inflationary environment comes with its own challenges. In particular, your savings will lose buying power if it doesn't earn a return that's at least equal to the current inflation rate. But, a high-yield savings account could make it possible to grow the purchasing power of your cash. 

Compare today's leading high-yield savings accounts now

Why you should open a high-yield savings account this May

Are you considering opening a high-yield savings account? Here are three reasons you should do so this May:

The federal funds rate remains elevated

Following the most recent Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced that it would keep its federal funds rate the same. Lenders then use this rate to determine what they offer borrowers. And that benchmark rate is sitting at a 23-year high.

In fact, today's elevated federal funds rate is one of the reasons some high-yield savings accounts are offering returns over 5% annually. It's important to take advantage of those high rates while they're available. 

Earn a better return on your savings with a high-yield savings account today

Variable rates could be a positive in today's inflationary environment

"The Federal Reserve doesn't seem likely to cut the benchmark interest rate any time soon," explains Steven Conners, founder and president of the financial planning firm, Conners Wealth Management. But, that's a good thing for those with funds in a high-yield savings account. After all, these accounts come with variable interest rates. So, if the Fed raises its benchmark rate, returns on high-yield savings accounts will rise, too.

"Inflation still doesn't seem to be cooperating," says Conners. And, since interest rate hikes are the most effective way for the Federal Reserve to combat inflation, that could mean that rate hikes may come in the future. 

Your savings could outpace inflation

Any money you have earning an annual return that's lower than the current inflation rate loses buying power over time. And, with the most recent inflation data showing the current inflation rate at 3.5%, finding safe accounts that outpace inflation can be a tall order. That is, unless you take a look at today's leading high-yield savings accounts

Top high-yield savings accounts currently have rates around 5% or higher now. Even on the low end of that scale, your savings could be beating inflation. That means your savings could be gaining purchasing power rather than losing it. 

Don't let inflation cost you purchasing power. Protect the buying power your savings has today with a high-yield savings account.

The bottom line

Rising prices can be difficult to contend with. That's especially true when you're saving money as traditional savings accounts can lead to a loss of buying power over time. Consider opening a high-yield savings account this May instead.

With the Federal Reserve making the decision to keep its federal funds rate elevated, returns on high-yield savings accounts are still impressive. At the same time, if stubborn inflation continues, interest rates could climb ahead - which may add to your high-yield savings account earnings. And leading options make it possible to generate positive inflation-adjusted returns on your savings. 

Why would you lose buying power with a traditional savings account? Open a high-yield savings account now.  

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