Interest rates on savings accounts have increased over the past few months to levels not seen in decades.

As savings rates continue to rise, many investors contemplate allocating more money into risk-free savings accounts instead of dicier assets, such as stocks.

How do today’s savings rates compare with stock market returns? Here’s what you need to know and should do as a savvy investor.

The Federal Reserve has raised interest rates to curb inflation and improve economic growth. We are currently at the highest savings rates in 15 years, the highest levels in decades.

How High Are Today’s Savings Rates?

Today’s savings rates are significantly higher than in recent years. While the specific numbers offered will vary depending on the bank and account type, many banks now offer percentages well above the national average.

As of May 2023, some banks are offering rates of over 4%. This is a significant increase compared to the numbers of the past decade.

Historically, stock market returns have been much higher than savings account rates.

How Do Current Savings Rates Compare to Stock Market Returns?

The S&P 500, often used as a benchmark for the stock market, has returned an average of around 12.3% per year since 1926. In contrast, competitive bank savings rates are currently between 4-5%.

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