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Savings Rates Can Still Beat Inflation

April 30, 2008

By MoneyRates Team | Money Rates Columnist

Many financial analysts have been stating in recent news stories and interviews on CNBC that in today's economy consumers cannot keep up with inflation by keeping their money in savings accounts. The typical quote refers to savings rates below 2% and inflation rates of 4% or higher -at which point a consumer would be effectively losing 2% or more of their savings a year just to keep up with higher prices and the pace of inflation. However, an important component of their formula that is not highlighted in the analyst's discussions is that they are invariably quoting the national average on savings and not referring to the type of savings rates an online investor could utilize. For instance, over the last year when the inflation rate topped 3.8% an online investor could have easily returned over 5.00% in a variety of money market accounts, checking accounts, savings accounts, and one year CDs offered by leading online banks like Countrywide Bank, EverBank, IndyMac Bank, Huntington Bank, and One United Bank. And those are just a few of the large number of banks who have been offering over 5.00% APYs or even 4.00% APYs on deposit products over the last year. A period of time during which the national average on a savings account would have been much lower after factoring in the thousands of banks that pay depositors very low rates. While it is certainly true that the American consumer is facing an uphill battle keeping up with the rate of increase in food and energy costs, the differential between the inflation rate and savings rates is not as dramatic as widely quoted if consumers can when save money at 4.00% and higher and not at the assumed national average of 1.50% and lower. Listed below are links for this week's highest bank savings rates:

Savings Accounts

Money Market Accounts

Interest Checking Accounts

Certificates of Deposit

Reward Checking Accounts

Online Bank Deals

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