Smart ways to protect your savings from inflation

[UNITED STATES] A new survey from Northwestern Mutual reveals that inflation continues to dominate Americans’ financial anxieties, with roughly two-thirds citing it as their primary concern. More than half of respondents anticipate inflation worsening in 2025.

Although inflation has eased significantly from its 9.1% peak in June 2022, persistent cost increases in essential categories such as housing, healthcare, and food continue to stretch household budgets. The Federal Reserve’s efforts to combat inflation through interest rate hikes have made progress, but economists caution that the final push to the central bank’s 2% target could be especially difficult. That uncertainty has many Americans uneasy about their financial futures.

With inflation hovering around the 3% mark for nearly two years, it's no surprise that it remains top of mind. According to the latest Consumer Price Index (CPI) data released this morning, February’s annual inflation rate stands at 2.8%. While this marks a slight dip from January’s 3.0%, it still exceeds the Fed’s target, keeping inflationary pressures in play.

The consequences extend beyond rising prices at the gas pump or grocery store. Inflation is also undercutting the financial preparedness of U.S. households—particularly when interest earned on savings fails to keep pace. With the national average savings rate at just 0.41% according to FDIC data, many savers are effectively losing money each month due to inflation.

This loss of purchasing power is especially concerning for retirees and those on fixed incomes who depend on savings for basic expenses. An AARP study found that nearly 40% of Americans over 50 have tapped into emergency savings to manage rising costs. Financial experts suggest that even modest changes—like moving funds into higher-yielding accounts—can help preserve financial health in an inflationary environment.

Fortunately, there are several strategies that allow savers to not only keep pace with inflation but potentially outpace it. With some accounts offering returns up to 5.00%, it's possible to beat inflation by one to two percentage points. Here are three practical options for safeguarding your emergency fund and improving your financial resilience:

Option 1: High-Yield Savings Accounts Offer Liquidity and Competitive Returns

A high-yield savings account is one of the simplest and most flexible tools for earning more on your cash while maintaining easy access. “A true emergency can happen any time and can’t be predicted,” said Ravi Subbaray, senior vice president of retail deposits at Curinos, a financial analytics firm. “It's better to put emergency funds in an account where you can access it fast without penalties.”

Branching out from your primary bank—especially to online banks—can unlock far better returns. Currently, the highest-paying national savings account yields 4.60% APY, with more than a dozen options offering at least 4.40%. These rates have consistently outpaced inflation for nearly two years.

However, savers should note that these rates are variable and subject to change. With potential Fed rate cuts on the horizon in 2025, yields on savings accounts could decline. For now, though, they remain a strong hedge against inflation.

Option 2: CDs Secure Today’s Rates for the Long Haul

Certificates of deposit (CDs) offer a valuable advantage: fixed interest rates that are locked in for the duration of the term. That means opening a CD now, while rates are high, can protect your earnings even if rates drop in the future.

Current CD rates range from 4.40% to 5.00% APY, covering terms from three months to five years. This flexibility allows savers to tailor their investments based on their financial goals and liquidity needs. Many opt to open multiple CDs with staggered terms—a strategy known as laddering—to maintain some accessibility while optimizing returns.

“When choosing a CD, the first thing to think about is how long you're willing to lock in your money,” Subbaray noted. “That said, the general rule of thumb is to seek a CD rate that is higher than inflation.”

With rates exceeding inflation by more than 1.6 percentage points, competitive CD offers can be found across all major term lengths—if you shop carefully.

Option 3: Bank Bonuses Add a Boost to Your Savings

For those looking to further enhance returns, bank account bonuses present another attractive option. These promotional offers can pay out hundreds of dollars—and sometimes close to $1,000—for meeting certain conditions.

Typically, checking account bonuses require a specific amount in direct deposits within a set period. Savings account bonuses often involve maintaining a minimum balance for a few months. While this resembles a CD in practice, early withdrawal doesn’t result in a penalty—only the forfeiture of the bonus.

Some institutions even allow customers to combine offers. For example, Chase currently offers a $900 bonus to customers who meet requirements for both checking and savings accounts. Business account holders may find additional opportunities as well.

Staying Ahead of Inflation

With inflation still outpacing traditional savings rates, it’s more important than ever for consumers to evaluate where their money is parked. Whether through high-yield accounts, CDs, or promotional bonuses, there are accessible strategies to protect—and even grow—your purchasing power in today’s economy.