• My bank recently lowered the APY on my high-yield savings account by almost half a percent.
• I am not happy that my money is generating less returns now and I don’t know what to do.
• Three financial advisors gave me some advice on where to invest, like CDs and T-bills.

It’s never nice to receive an email from your bank informing you that the interest rate on you high yield savings account is decreasing.

Unfortunately, like many Americans happy to collect a robust return on their savings, we received three of these notices in the past three months as the Federal Reserve began to cut interest rates. From August to the end of October, the annual percentage return (APY) on my high-yield savings account dropped from 4.6% to 4.2%.

I opened this bank account almost two years ago, immediately after graduating from college. In 2023, with inflation still high, interest rates were at their highest levels since the Great Financial Crisis and it appeared that most banks were offering nearly 5% returns on savings. After paying my bills each month, I would put the rest of my paycheck into my high-yield savings account and watch the number grow.

Now, it looks like the days of a 5% APY are in the past. In September, the Federal Reserve cut interest rates by 50 basis points, marking the beginning of the end for high interest rates. Continuing this trend, the chairman of the central bank, Jerome Powell, announced a 25 basis points cut last week and is expected to cut rates further in the coming months.

Can I do anything about the state of my savings account or do I have to watch my return slowly erode? Curious, I asked three financial experts for advice on the matter.

As a famous politician once said, I didn’t just fall out of a rooster. Context is important. Patti Black, a financial advisor at Savant Wealth Management, reminded me that the recent high-interest environment is a significant departure from the past decade, when interest rates were close to zero and there was no return on cash. So while returns dropping from almost 5% might seem like a tough pill to swallow for someone like me who just opened an account in the last couple of years, it’s still a pretty good deal when you consider where were rates in the past.

I didn’t have a bank account in the post-2008 zero interest period, so that was useful context. Maybe my generation really is being moved—first by our parents and now by Jerome Powell’s post-pandemic rate hikes.

Black also suggested that I change my perspective. While a rate cut cycle means less return on my cash, it also means lower borrowing costs on a car loan or mortgage, which is good news for the housing market.

But there are other options for where I can put my money, Black said. Of course, an alternative is a certificate of deposit (CD), which is essentially a savings account that holds money at a fixed rate of interest for a fixed period of time. CDs generally pay higher interest rates than savings and money market accounts in exchange for locking up your money for anywhere from three months to many years. My hands are a bit tied though. A well-known rule of thumb is to keep three to six months of living expenses available in your bank account as an emergency fund (read: liquid and highly accessible), so it’s not a good idea to lock money away in my high yield. savings account for an extended period of time. I could withdraw my money from the CD if needed, but I would have to pay some or all of the interest I had accrued up to that point as a penalty.

With that in mind, Black said sometimes it doesn’t matter what the high-yield savings account rate is — it’s the best place to park cash for easy access.

Armed with this background, I still wanted to see if there were more ways to put my money to work for me.

Daniel Milan, a financial advisor at Cornerstone Financial Services, had some other thoughts about CDs. A three-month CD might be a good option if I liked locking up my money for that amount of time, according to Milan.

My bank didn’t offer CDs, so I would have to open a new bank account, which isn’t necessarily a bad thing. Some financial experts recommend having multiple bank accounts for different savings goals. Searching online, I saw multiple options yield over 4.6%.

However, Milan did not recommend me to close my money for longer. Typically, the longer the CD, the higher the rate. But that’s not always the case in today’s market.

“In this current environment, it doesn’t make sense to go more than three months on a CD because the three-month CD pays you more than a year or two years right now,” Milan said.

Looking at CD offers from a variety of banks, I found that this was indeed true – in general, the longer the term of the CD, the lower the rate, especially after 1 year . Rates on 6-month and 9-month CDs have also been attractive, depending on the bank, but again, my liquidity needs take them off the table.

Many of the banks I looked at didn’t even offer short-term CDs. For example, one option offered an APY of 4.5% on an 11-month CD, 3.7% on a 2-year CD, and 3.5% on a 5-year CD.

It wouldn’t make sense to move my money out of the savings account without sufficient compensation for the lower liquidity.

“You don’t get paid for that lack of liquidity,” Milan told me.

short term Treasury bills they are another investment option for a higher return and offer more liquidity than CDs, according to Richard McHorter, private wealth adviser at SRM Private Wealth. A three-month T-bill is currently yielding 4.43%.

There’s also the added benefit of tax savings, which is especially appealing to McHorter, who lives in California: “If you’re a resident of a high-income state, I’d look at Treasury bills.”

As a resident of New York City, the idea of ​​lower taxes certainly appeals to me. If I were to buy Treasury bills, I would only have to pay federal taxes, bypassing state and local income taxes.

McHorter also said that there is a lot of uncertainty about interest rates right now and that they could start to rise again. Trump proposed tariff policies could raise inflation, in which case the Fed would likely raise rates to combat an overheating economy, he said.

If I buy a three-month T-bill, I can reassess the inflation situation when I get my money back in three months and reinvest it accordingly, McHorter said.

When it comes to interest rates and inflation, pay attention to the data and don’t try to predict the market with your money, Milan advised. Jerome Powell himself said it was too early to tell how the election results might reshape markets and interest rates.

“My advice to anyone would be: Be diligent in reading and interpreting the data as it comes in,” Milan said. Track inflation data and Fed comments and base your investment decisions on the information at your fingertips.

It feels like the market is in a bit of limbo as everyone waits for the effects of the election to play out, but as Black noted, taking no action right now isn’t the worst decision.

What’s next? For starters, I’m going to sit down and crunch some numbers for what three to six months of living expenses looks like for me, and keep that in my high-yield savings account. With the money I have left, I have some good options.

Are you a Gen-Zer who has recently faced an investment problem? Feel free to contact Christine at [email protected] to share your story.