The U.S. inflation report released Tuesday showed that consumer prices are still growing. The report points out that prices in January were 3.1% higher than they were one year earlier; economists expected consumer prices to grow at a 2.9% rate. 

The current inflation rate plays a significant role in the returns you can earn on deposit accounts. That’s because when inflation is high, the Federal Reserve typically increases rates – or maintains high rates – in an effort to spur saving and hinder consumer spending. So, today’s news may be good for savers. That’s especially true for those who make wise moves in today’s high interest environment. 

Take advantage of today’s high rates with a high-yield savings account now. 

3 important things savers should do with inflation still hot

High inflation can be unsettling at the gas pump or the grocery store checkout, but savvy savers may welcome it. After all, high inflation rates likely mean that the Federal Reserve will keep interest rates on hold at 22-year highs – at least for the short-term. So, how can you get the most out of today’s high rates? 

Open a CD

When you open a certificate of deposit (CD), you agree to keep the money you open the CD with in the account for its entire term. That could be anywhere from a few months to 10 years. In exchange for your willingness to keep your money in the account, the financial institution you open the CD with agrees to pay you a fixed interest rate throughout the account’s term. 

So, if you open a 5-year CD with a 4.5% APY, you’ll earn a 4.5% annual yield on the money you deposit for the next five years – regardless of what happens with the inflation rate or the Federal Reserve. That’s important because some economists expect the Fed to start reducing interest rates as soon as May or June of this year. 

These accounts typically come with FDIC or NCUA insurance on balances up to $250,000. And since most accounts penalize you if you access your money before the end of the account’s term, you’ll be less likely to tap into your savings, allowing your funds to grow uninterrupted.

Compare leading CD options now to lock in today’s high rates. 

Open a high-yield savings account

Traditional savings accounts usually come with menial interest rates. According to the FDIC, the average savings account interest rate is just 0.47% – well below the 3.1% inflation rate. “If the return on an investment does not at least keep up with the rate of inflation, it will result in the loss of purchasing power over the long-term,” explains Krisstin Petersmarck, investment advisor representative at Bridgeriver Advisors. 

At a 0.47% yield, the average traditional savings account is losing buying power at a rate of around 2.63% annually. A high-yield savings account may solve that problem. 

High-yield savings accounts generally offer significantly higher APYs than their traditional counterparts. For example, the leading high-yield savings account options offer rates ranging from 4.35% to 5.25%. That means you can earn an inflation-adjusted return of between 1.25% and 2.15% with some of the best high-yield savings accounts. 

As is the case with CDs, today’s high rates aren’t the only reason to open a high-yield savings account. These accounts usually come with FDIC or NCUA insurance on balances up to $250,000. Moreover, they typically make it easy to access your money, offering up to six withdrawals per month (though your financial institution may penalize you if you need access to your savings more than six times in any month). 

Get started with a top high-yield savings account here now.

Reduce frivolous spending to allocate more to savings 

Do you go to your local coffee shop and spend $4.50 every morning or eat your lunch at restaurants every day? These frivolous spending habits may seem insignificant, but they can cost you large amounts of money over time. For example, if you spend $1 per day to brew your coffee at home, you could save $3.50 every day. That doesn’t seem like much, but it adds up to $1,277.50 in savings per year.

When you cut frivolous spending habits like this out of your budget, you’ll be able to allocate more of your money to savings. So, look for opportunities like the example above to turn what looks like insignificant savings into a meaningful return to make the most of today’s high rates. 

Find out how much you can earn with today’s leading high-yield savings account options. 

The bottom line

Inflation is still hot across the U.S. So, you can expect to continue feeling the pinch at checkout. However, that also means high rates will remain so, at least for the near term – giving you the opportunity to earn meaningful returns with savings vehicles like CDs and high-yield savings accounts. As such, it may be wise to look for opportunities to reduce your spending and allocate more funds to deposit accounts that make the most of today’s high rates. Ultimately, “If your interest rate is higher than the inflation rate, you are in a good position,” says Petersmarck.

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids, three dogs and 10 ducks.