With inflation sky high this past year, the Federal Reserve has steadily increased interest rates, with rates now at a 22-year high. Higher interest rates have made the cost of borrowing money rise, but at the same time has made saving money a strong investment. But you have to be proactive to get the benefits of the current rates.

In a high interest rate environment, it is prudent to be proactive in talking with your bank about different options that can help you reach your financial goals. A banker can talk with you about different financial tools that are available; however, when you have these conversations, you want to ensure you fully understand the terms and conditions before you open an account and deposit money. Discover how to take advantage of a higher rate environment.

Understand the account types

There are several different types of savings accounts such as a traditional savings account, time deposit or money market account that can earn you interest on your deposits. Each account has pros and cons depending on your financial situation.

Savings account

A savings account is a foundational account in your financial arsenal. This account can be linked to your checking account and receive automatic deposits, earn interest on the money kept in the account and used to help you pay for an emergency or financial goal. When you open a savings account, the goal is to let the money sit here and grow through your contributions so you can earn interest on the account. Some banks will also offer a high-yield savings account, which means you can earn a higher interest rate on the money you deposit; however, these accounts can come with more stipulations such as opening deposit amount and how you can access the funds. Talk with your banker about your best option.

Time deposit account

A time deposit or certificate of deposit (CD) is a savings account that locks your money in for a certain time period for example, three, six or nine months. If you need to access the money prior to the maturity you will likely have to pay a penalty fee. Interest rates tend to be slightly higher on time deposits and can be a great tool if you know you won’t need those funds for several months.

Money market

A money market account is a unique account that allows you to save funds at a competitive interest rate with multiple ways to access your funds. You can earn interest on your deposits and pull money directly from this account to pay expenses, similar to a savings account.  Money market accounts oftentimes have limitations on the number of monthly fee-free withdrawals you can make, so it is wise to consult with your banker about potential fees.

These are just three types of accounts that could support your financial goals in a high interest rate environment.

Know your number

As you investigate different account options, it is important to look at your entire financial picture. Take a look at your expenses and determine how much extra cash you might be able to deposit in an account. Do you know if you have a big purchase to make in three months and need access to your savings? Also look at your goals and think through scenarios and how different accounts may help you get there. Your unique financial situation and goals should be the determining factor for which account type of you select.

Things to be aware of

  • Some banks might offer a cash back bonus for opening an account, however, you might need to maintain a certain balance, leave the funds untouched for a period of time or only make a certain number of withdrawals. Read the fine print and ask questions as you explore your options.
  • If you decide to use one of the accounts listed above, remember you will pay taxes on the interest you earn. This can be a surprise for some so make sure you account for interest income you’ll need to list on your taxes. A tax professional can walk you through how to properly list earned interest income on your taxes.
  • The amount of money you decide to deposit and which savings account you select can determine what interest rate you earn.

Create your savings strategy

Saving money should be a component of your financial plan and something you assess regularly. For many, saving has to happen in order to buy a home, take a vacation or make a large purchase. It can be rewarding to save and see a balance grow. It is always a good time to save money, and now you might be able to earn a little more interest since rates are higher than in previous years. How you save and which financial tools you use to achieve your goals should be part of your financial strategy. Talk with your bank about the different opportunities available to you.

UMB personal banking solutions offer convenience and simplicity to meet all of your past, present and future financial needs. From home loans to auto financing and everything in between, see how UMB personal banking can work with you to find the right products for your life and lifestyle.


Income will be reported to the first signer on the account, in the year received, as required by applicable law. Please consult your tax advisor if you have any questions as UMB Bank, n.a. does not provide tax advice.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.