You Should Move Some Money Out of Your Savings Account by 2025. Here's Why

Image source: The Motley Fool/Upsplash

If you have a lot of money in a high-yield savings account, you've likely been earning pretty great rates lately. Some accounts are paying APYs upwards of 5.00%, which is a really competitive rate for money in an FDIC-insured account that you can't lose.

However, while you may be getting a really good return on your account right now, you should seriously consider moving some money out of savings before 2025 arrives. Here's why.

Your high-yield savings account probably isn't going to keep paying such competitive rates for long

There's a really simple yet important reason why you may want to start moving some money out of your savings account. Even the best high-yield savings accounts paying the most competitive rates are probably not going to keep offering such great rates into 2025 and beyond.

That's because these high-yield accounts have variable interest rates. Banks make no promises to you that they'll keep paying you the rates they're paying you today on the money you have in savings. If market conditions change, they can drop their yields immediately and the APY you're getting could decline dramatically.

And market conditions are almost inevitably going to change. The U.S. central bank, the Federal Reserve, has made it very clear that it's eager to reduce the benchmark interest rate. That's the rate at which banks borrow overnight from each other. If the benchmark rate is cut, banks are likely to respond by lowering the yields they are offering on savings (and other deposit) accounts.

The Federal Reserve raised the benchmark rate in response to the post-COVID inflation surges that have occurred and driven up prices. However, in 2024, while inflation is still higher than the Fed's target of 2.00% (the latest numbers show it's currently sitting at 3.3%), it's lower than it was in 2022 and 2023.

Fed policy makers also believe inflation is likely to continue getting closer to the benchmark, and officials have indicated they'd like to cut rates once in 2024 and another four times in 2025.

While there's no guarantee that this will happen, there is every reason to believe that rates are going to go down next year -- and that your bank account yields are going to fall quickly when they do.

Move some money into CDs before it's too late

Since the interest rates offered by high-yield savings accounts are likely to start declining by the end of this year and continue going down into next year, you should seriously think about moving some of your money out of savings and into a certificate of deposit (CD) instead.

CDs are different from high-yield savings accounts. They are offering similarly competitive rates right now, with many paying yields in the mid-4.00% range and a good number paying above 5.00%. However, unlike savings accounts, these rates are guaranteed to last for the duration of the CD term.

If you buy a 5-year CD, you are guaranteed to get the rate that you're offered today for the next half-decade. So, even as interest rates start to decline, you will keep getting a great return on your investment.

Now, the catch is you have to commit to not taking the money out of your CD until the term ends or you could face what's known as an early withdrawal penalty. But, if you have some money in savings you aren't going to need for a while, moving it out of savings and into a CD can be a smart choice.

CDs come with different term lengths, with many banks offering CD terms ranging from three months to five years. Many also have no minimum deposit requirements or low minimum deposit requirements. So, take a look at what money you have in savings. If there's some of it you won't need for a while, think seriously about moving it into a CD before 2025.

When rates start to decline but you still get to earn well above 4.00% on your invested cash for the foreseeable future, you'll be glad you did.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy .