HYSA Rates Are Dropping—Here’s Why That Doesn’t Matter

Something people need to understand about High-Yield Savings Accounts (HYSAs) is that the 5% and 4% interest rates were never going to last. I’ve seen many people online complaining about their savings rates dropping and asking for advice on where to move their cash next. I think this is absurd. Once again, you have people who mean well and want to do more with their money but can’t let go of short-term thinking.

HYSAs are still better than most traditional bank accounts. The high interest rates were a result of the pandemic aftermath and the Federal Reserve’s interest rate hikes. From the start, it was clear that these rates weren’t permanent. HYSAs saw unusually high rates due to the Federal Reserve’s aggressive rate hikes to combat inflation after the pandemic.

For example, when I opened my HYSA, the interest rate was 3.90%. It rose to higher levels during the rate hike environment but has since returned to 3.90% as things have calmed down. I have no desire to move my money elsewhere.

Why? Because this is my emergency fund, and even at 3.90%, it earns a higher rate than my main savings account. Plus, you should never invest your emergency fund—I don’t care what anyone says. To protect what you’ve built in the stock market, you need cash on hand so you don’t have to liquidate your investments during an emergency.

Your investments are the castle. Your emergency fund is the moat. Without the moat, your castle is vulnerable to attacks. In this case, those attacks are unexpected expenses, unforeseen events, and market volatility. Don’t fall into the trap of short-term thinking or the infamous “get-rich-quick” mentality.

HYSAs are still an excellent place to store cash. They aren’t meant to make you rich. For my household, I’ll soon be setting up next year’s automatic transfers into our HYSA for the next 12 years. The plan remains the same—it hasn’t changed. The goal has always been to have an account that earns interest on the cash we set aside and don’t touch.

This account is separate from our living expenses, and we prefer it that way. We don’t have to worry about fluctuations because it’s not invested in the market. It just sits there, collecting interest every month. With additional deposits on top of the interest, we watch it grow consistently.

It’s one of the best things you can do to build financial security. Protect the castle. Don’t let emotions get the best of you.