With the likely confirmation of Janet Yellen as the next Federal Reserve chairman, consumers should be prepared for ultra-low interest rates to persist for at least another 12 to 18 months. As a current vice chair on the Fed's board of governors, Yellen is widely expected to keep the Fed's easy-money policies intact in the near future if she reaches the Fed's highest post.
Although many Americans may benefit from low mortgage rates, a bullish stock market and increased liquidity in the financial system, families who save a significant portion of their household income in savings accounts are paying a price for these low-rate policies. A majority of large commercial banks are currently offering yields of well under 1 percent -- a fraction of their historical average.
Nevertheless, everyone needs a savings account with an emergency fund of six to 12 months in living expenses, so how can consumers manage their bank accounts to maximize what earnings are available? Here are five tips that can help.
1. Choose your vehicle carefully
Just because rates are low doesn't mean Americans should immediately transfer all their money to an investment portfolio or use their excess cash as a down payment for an investment property. Although the stock market is significantly more liquid than a home, emergencies can require investors to sell their holdings at a loss during market fluctuations.If security and liquidity are important to you -- which may be especially true if you're nearing retirement -- FDIC-insured deposit accounts can still be a sensible choice. Consider creating a CD ladder or opening a money market account. Both of these options may offer higher yields and greater returns than your standard savings account while still providing some liquidity and easy access.