This article may contain references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services. Nonetheless, our opinions are our own.
The information presented in this article is accurate to the best of our knowledge at the time of publication. However, information is subject to change, and no guarantees are made about the continued accuracy or completeness of this content after its publication date.
Interest rates keep changing, so it’s important to look at different ways to save and invest. To make smart choices about your money, you need to stay up-to-date on the savings and investment options that are out there. Individuals can make smart choices about how to grow their money by comparing options based on yield, risk, and liquidity.
- Current Interest Rates (March 2025)
- How Different Interest-Bearing Accounts Compare
- Using Laddering Strategies Beyond CDs
- How the Federal Reserve Affects Mortgage Rates
- Final Thoughts
- Frequently Asked Questions
- What’s the safest place to keep my short-term savings?
- How do I build a CD ladder?
- What’s the difference between MMAs and HYSAs?
- Are Treasury securities taxable?
- What risks come with bond ETFs?
- Is it better to lock into a 5-year CD now or wait?
- Can I lose money in a High-Yield Savings Account?
- How does the Federal Reserve affect all these rates?
- What’s better for long-term goals: CDs or investing in stocks?
- Are there other alternatives to consider in 2025?
- Recommended Reads
Current Interest Rates (March 2025)
| High-Yield Savings Account (HYSA) | 4.25% |
| Money Market Account (MMA) | 4.10% |
| 1-Year Certificate of Deposit (CD) | 4.35% |
| 5-Year CD | 4.75% |
| Treasuries (10-Year) | 3.85% |
| Treasuries (1-Year) | 4.50% |
| Investment-Grade Bond ETF | 5.10% |
| S&P 500 Dividend Yield | 1.50% |
How Different Interest-Bearing Accounts Compare
High-Yield Savings Accounts (HYSA) & Money Market Accounts (MMA)
- Liquidity: Immediate access to funds.
- Safety: FDIC-insured up to $250,000.
- Yield: Currently around 4.25% (HYSA) and 4.10% (MMA), but variable.
- Consideration: Rates can change anytime.
Certificates of Deposit (CDs)
- Yield: Fixed rates-e.g., 1-year CD at 4.35%, 5-year CD at 4.75%.
- Safety: FDIC-insured.
- Laddering Strategy: Stagger maturities to balance liquidity and returns.
- Consideration: Penalties for early withdrawals.
Treasuries
- Yield: 1-year Treasury at 4.50%, 10-year Treasury at 3.85%.
- Safety: Backed by the U.S. government.
- Liquidity: Can be sold before maturity, but price may fluctuate.
- Consideration: Lower after-tax yield for taxable accounts.
Investment-Grade Bond ETFs
- Yield: Around 5.10%.
- Diversification: Spreads risk across multiple bonds.
- Liquidity: Traded like stocks.
- Consideration: Prices fluctuate with interest rates.
Stock Market & Dividend Investing
- S&P 500 Dividend Yield: 1.50%.
- Potential Growth: Historically, the S&P 500 has outperformed bonds over long periods.
- Consideration: High volatility.
Voted "Best Overall Budgeting App" by Forbes and WSJ
Monarch Money helps you budget, track spending, set goals, and plan your financial future—all in one app.
Get 50% OFF your first year with code MONARCHVIP
Using Laddering Strategies Beyond CDs
Laddering is most often used with CDs, but it can also be used with other fixed-income tools like bonds and Treasuries. A Treasury ladder means buying bonds with different maturities, like 1-year, 3-year, and 5-year bonds, so that you always have bonds maturing that you can reinvest or take out.
This method helps lower the risk of interest rate changes and makes the income stream more stable. Bond ETFs can be a good addition to this strategy because they give you more options and exposure, but they don’t have set maturities.
How the Federal Reserve Affects Mortgage Rates
- The Federal Reserve does not set mortgage rates directly but influences them through federal funds rate adjustments.
- Higher Fed rates generally lead to higher mortgage rates as borrowing costs increase.
- In March 2025, the Federal Reserve maintained its benchmark rate at 5.25%, signaling a possible hold on future hikes. (Source: Federal Reserve Economic Data—FRED)
Final Thoughts
When it comes to deciding where to park your funds, whether in a High-Yield Savings Account (HYSA), Money Market Account (MMA), Treasuries, CDs, individual bonds, or bond ETFs, it all boils down to your financial goals, risk tolerance, and liquidity needs. Each option has its set of benefits and considerations. It’s necessary to assess your priorities and align your investment choices with what suits you best. Remember, diversification and balance are key elements in building a robust financial portfolio. Your choice depends on your need for liquidity, risk tolerance, and investment horizon. Keep monitoring fluctuations in interest rates and adjust your investments accordingly.
Frequently Asked Questions
What’s the safest place to keep my short-term savings?
When it comes to short-term savings, safety and liquidity should come first. High-Yield Savings Accounts (HYSAs) and Money Market Accounts (MMAs) that are insured by the FDIC are the best. These accounts currently pay more than 4% in interest and let you get your money quickly, so they are good for saving money that you need in 6 to 12 months.
How do I build a CD ladder?
A CD ladder means opening several CDs with different maturity dates, like 1 year, 2 years, 3 years, and so on. This strategy helps you balance getting higher interest rates with having cash on hand when you need it. You can then reinvest the money at higher rates in the future or use it when you need it.
What’s the difference between MMAs and HYSAs?
While both accounts offer liquidity and competitive interest, the differences are:
HYSAs are online-only and typically offer slightly higher yields.
MMAs may offer check-writing or debit card access but can have minimum balance requirements or monthly fees.
Your choice should depend on your accessibility preferences and account fees.
Are Treasury securities taxable?
Yes, federal income tax applies to Treasury interest, but state and local taxes do not. This can make Treasuries a better way to save money on taxes than bank interest or corporate bond yields, especially for people who live in states with high taxes.
What risks come with bond ETFs?
Bond ETFs are subject to market volatility. Their prices can drop when interest rates rise. However, they offer:
Diversification across issuers and sectors.
Daily liquidity, as they trade like stocks.
Investors must weigh this volatility against the stability and predictability of individual bonds or CDs.
Is it better to lock into a 5-year CD now or wait?
It depends on your rate outlook and liquidity needs:
If you think rates will go down, locking in now will give you a 4.75% yield over five years, which is good.
If rates may rise, shorter-term CDs or Treasury bills allow more flexibility for reinvestment.
Use a laddering strategy to mitigate this uncertainty.
Can I lose money in a High-Yield Savings Account?
Not if the account is FDIC-insured and your balance is less than $250,000 per depositor, per institution. While interest rates can drop, your principal remains safe, making HYSAs one of the lowest-risk savings options available.
How does the Federal Reserve affect all these rates?
The Fed’s federal funds rate influences how much banks charge each other for short-term loans. This trickles down into:
Savings and CD rates
Treasury yields
Mortgage and loan interest rates
When the Fed raises rates, banks typically increase yields to attract deposits—but also raise borrowing costs.
What’s better for long-term goals: CDs or investing in stocks?
CDs are safe investments, but over time they may not keep up with inflation. Stocks, especially diversified index funds, have a higher chance of growing, but they are also more volatile. For most long-term goals, a mix of CDs for stability and stocks for growth can work.
Are there other alternatives to consider in 2025?
Yes, depending on your risk appetite and goals, consider:
I Bonds (U.S. inflation-protected bonds, currently offering competitive yields)
REITs (Real Estate Investment Trusts for income-focused investing)
Robo-advisors (automated portfolios based on your risk tolerance)
Always ensure the investment aligns with your timeline and liquidity requirements.
Reviewed and edited by Albert Fang.
See a typo or want to suggest an edit/revision to the content? Use the contact us form to provide feedback.
At FangWallet, we value editorial integrity and open collaboration in curating quality content for readers to enjoy. Much appreciated for the assist.
Did you like our article and find it insightful? We encourage sharing the article link with family and friends to benefit as well - better yet, sharing on social media. Thank you for the support! 🍉
Article Title: Mastering Interest Rates: Factors to Consider
https://fangwallet.com/2025/08/04/mastering-interest-rates-factors-to-consider/The FangWallet Promise
FangWallet is an editorially independent resource - founded on breaking down challenging financial concepts for anyone to understand since 2014. While we adhere to editorial integrity, note that this post may contain references to products from our partners.
The FangWallet promise is always to have your best interest in mind and be transparent and honest about the financial picture.
Become an Insider
Subscribe to get a free daily budget planner printable to help get your money on track!
Make passive money the right way. No spam.
Editorial Disclaimer: The editorial content on this page is not provided by any of the companies mentioned. The opinions expressed here are the author's alone.
The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur including the potential loss of principal.
Source Citation References:
+ Inspo
There are no additional citations or references to note for this article at this time.
