SAVINGS ARE GREAT, BUT INTEREST IS DEPRESSING

Historically low interest rates are a boon for homebuyers. But for savers? Not so much. Low rates for borrowers typically also mean lower rates for savers. Because banks are earning less on loans, they typically pay out less on savings to make money.

The average rate paid by banks on basic, federally insured savings accounts — known as the annual percentage yield — was a mere 0.05 percent as of Monday, according to the Federal Deposit Insurance Corp.

That means if you had $5,000 in a savings account, you would earn $2.50 a year on your money.

“It’s almost an insult,” said Cheryl Costa, a wealth manager outside Boston.

Nor should savers count on an improvement anytime soon. The Federal Reserve has signaled that it expects to keep interest rates near zero for the next couple of years, as it manages the economy through the pandemic and its aftermath.

“The Fed has signaled that these low rates are going to be here for a while,” said Jonathan Clarke, an associate professor of finance at Georgia Tech’s Scheller College of Business.

That’s good news for borrowers. Mortgage rates are at historic lows, dropping below 3 percent for both 30-year and 15-year fixed-rate home loans this month, according to Freddie Mac. Even interest rates on credit cards have fallen slightly, though they remain in the double digits since that debt isn’t secured by collateral, like a house. The average credit card rate is 16 percent, a four-year low, down from more than 17 percent a year ago, according to Bankrate.

But some Americans have accumulated cash reserves during the economic uncertainty of the pandemic. The personal savings rate spiked to a record 33 percent in April and was still almost 18 percent in July, double what it was throughout 2019, according to the federal Bureau of Economic Analysis. (The bureau defines personal savings as income left over after people spend and pay taxes.) What’s a saver to do?

It can be demoralizing to salt away cash only to see it earn anemic interest. But it’s important to keep in mind the purpose of the money you’re holding, said Malissa Marshall, a certified financial planner in Vermont.

If the funds are meant for a rainy day, making as much money as possible isn’t the primary goal.

“It needs to be sitting there, if you have an emergency,” Marshall said.

Other funds that you expect to use within the next year or two — say, for a down payment on a home — should also be kept in a low-risk account even though they are paying low rates, she said.

Online banks, which generally lack brick-and-mortar branches, typically pay higher rates, but still aren’t paying anywhere near the 2 percent interest they offered last year. Now, their rates are typically below 1 percent, even on so-called high-yield savings accounts. Ally Bank, for example, is offering 0.8 percent on its savings account; Capital One is offering 0.6 percent. (Your $5,000 deposit would earn you $40 at Ally and $30 at Capital One after one year, assuming you didn’t make additional deposits.)

Certificates of deposit, which lock in a rate for a fixed period, aren’t much better, and you’ll typically pay a penalty if you take the cash out early. Marcus, Goldman Sachs’ retail bank, is paying 0.85 percent on a one-year CD.

If you really want to earn more, you may have to take on extra risk. One potential option to consider are “ultra” shortterm bond funds, which invest in a mix of government bonds and high-quality corporate debt with terms of one year or less. But it’s important to know that they aren’t risk free.

“Yes, you’ll get a higher rate,” Costa said. “But there is the possibility of losing some money.”

Corbin Blackwell, a financial planner with the online adviser Betterment, said that while savings rates were quite low, they were better than leaving your money in a traditional checking account. If you’re comfortable with taking some risk, she said, another option may be to invest your cash conservatively, in a mix of 15 percent stocks and 85 percent bonds.

Here are some questions and answers about savings rates:

Are there CDS that don’t carry a penalty for early withdrawals?

Yes. Many banks, including online banks, have no-penalty CDS, which guarantee a rate for a specific term and don’t charge for early withdrawal. The downside: The rate will be a bit lower than a traditional CD of the same term. But if you don’t want to worry about access to your money, this can be a reasonable option.

Are high-yield checking accounts an option?

You could consider a highyield or “rewards” checking account if you qualify and have less than $20,000 to put to work, said Ken Tumin, founder of rate tracking website Depositaccounts.com.

These accounts pay as much as 3 percent, but there are hoops to jump through. Typically, there are caps on the amount of cash that can earn the top rate, and you’ll need to meet quotas for using the account’s debit card. If you swipe the card nine times but the requirement is 10 times, you’ll miss out on the higher rate for that month.

“It’s something you have to pay attention to,” Tumin said.

Should I consider paying down debt?

Yes. You’re probably paying significantly more in interest on student loans and credit cards than you can earn in a savings account, so why not reduce your balances?

“With rates so low, it makes even more sense to pay off highinterest debt,” Marshall said.