5 strategies to boost your savings with low interest rates

In March 2020, the Federal Reserve cut its federal funds rate to near zero, a record low. While this action resulted in lower interest rates for select types of loans and credit cards, it also resulted in lower interest rates on savings accounts.

How can I increase my savings quickly?

Here are five ways you can boost your savings now and in the future.

1. Compare savings rates from multiple banks
2. Take advantage of sign-up bonuses
3. Switch to an account with no bank fees
4. Create a budget
5. Set savings goals

1. Compare savings rates from multiple banks

If you have an account with a traditional bank, you may be getting next to nothing in terms of interest on your savings. However, many online and even some traditional banks have started to offer high-yield savings accounts. These accounts can offer upwards of 10 times the rate versus traditional savings options.

But even among high-yield savings accounts, interest rates can vary. So it’s crucial that you shop around and compare rates from multiple banks to find the best one.

2. Take advantage of sign-up bonuses

Some banks and credit unions offer bonuses for new account holders. In most cases, you typically need to meet certain requirements to earn the cash. For example, you may need to set up direct deposit, meet a spending goal on your debit card or hold a minimum amount of money in the savings account for a predetermined amount of time.

Depending on the financial institution, sign-up bonuses can range from $50 to several hundreds of dollars. Again, it’s important to take your time to research several options to find the best bonus that you qualify for.

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3. Switch to an account with no bank fees

A lot of traditional banks still charge monthly maintenance fees. In some cases, you can get the fee waived if you meet certain criteria, but you may be better off with an account that doesn’t charge a monthly fee by default. In general, most online bank accounts don’t charge monthly fees — some don’t even charge overdraft fees, which can come in handy if your balance runs low.

Remember, though, that you’ll have a hard time finding a bank that doesn’t charge any fees at all. As you shop around, make sure you also look at the fee schedule for each account to avoid paying more than you need to.

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4. Create a budget

If you’re not already on a budget, you can create one by writing down your monthly income and expenses over the last few months. Then categorize each expense, so you have an idea of where your money is going each month. This process can take time, but it allows you to look for areas where you can cut back and reallocate that cash flow toward your savings account instead.

You’ll also want to set monthly savings goals and budgets for each spending category, so you can maximize your savings over time.

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5. Set savings goals

Sometimes all it takes is the right motivation to make saving money a priority. Think about what you want to save up for.

For example, you may be hoping to buy a house or a car and need money for a down payment. Or you’ve been daydreaming about your next vacation. Whatever your goal, writing it down and visualizing it can make it easier to work on boosting your savings.

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When will interest rates return to pre-pandemic levels?

It’s difficult to say when interest rates will go back up. In June 2020, the Fed indicated that it wouldn’t be raising its federal funds rate until 2022. Because the federal funds rate impacts short-term rates like credit cards, certain types of loans and savings APYs, it may still be some time before we see better yields.

This is primarily because banks and credit unions are receiving lower yields on their loans, so they can only afford lower APYs in return to maintain profitability goals.

The bottom line

Whatever your savings goals are, it’s important to be proactive about increasing your monthly savings rate. These steps can help you better achieve your goals, but it’s important to know which ones will work best for you. Consider all your options to find the right path forward for your savings.

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