Cash savers still have an opportunity to beat inflation. Here’s how

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It may be a while longer before the Federal Reserve lowers interest rates, experts now say.

That means savers can still earn the best returns on their cash in years, following a “nuclear winter for the better part of the last 15 years,” said Greg McBride, chief financial analyst at Bankrate.

“We’ve now had two years in a row where both liquid savings and timed deposits like CDs [certificate of deposits] are paying yields that are well ahead of inflation,” McBride said.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

The Fed has largely been expected to start a series of interest rate cuts this year after hiking rates to combat historically high inflation.

But as the economy continues to perform well and inflation is still higher than the central bank’s 2% target, predictions for how much rates will come down and when have become less certain.

“Even though rates might start dropping a bit here or there, they’re still going to be relatively high,” said Ken Tumin, senior industry analyst at Lending Tree and founder of DepositAccounts.

‘It’s a good time to lock in’

Inflation is the main source of financial stress, CNBC's Your Money Survey finds

Online savings accounts provide higher yields

Online high yield savings accounts provide more flexible terms for accessing cash and annual percentage yields more than 4%, in many cases.

Yet 67% of Americans are earning interest rates below that threshold, according to a recent Bankrate survey.

The two top reasons respondents cited for not moving their money included wanting access to their cash through their local bank branch and being comfortable with their current financial institution.

However, savers should keep in mind they don’t necessarily have to give up branch access or completely sever ties with their current bank or credit union if they set up an account that’s linked to their existing accounts, McBride said.

“You’re just going to send your savings somewhere where it’s going to be welcomed with open arms and higher yields,” McBride said.

Consider when you need the money

When choosing between locking in returns on cash or finding a better rate on a liquid savings account, the timing of your goals should be your priority.

“The fundamental determinant is, ‘When do you need the money?'” McBride said.

Ask yourself whether you need to have access to your cash at a moment’s notice or whether you can afford to lock it up for multiple years, he said.

For investors who have ample cash, it may make sense to break up deposits among online savings accounts, short-term CDs, and even long-term CDs or Treasury notes, according to Tumin.

“No one really knows where interest rates are going to fall,” Tumin said. “So you can try to kind of hedge your bets.”

However, for savers without much savings, a high yield online savings account still makes the most sense, he said. All savers — regardless of deposit size — should make sure their deposits are insured by the Federal Deposit Insurance Corp.

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