Despite lower consumer confidence, interest rates are expected to remain steady at the upcoming Federal Reserve meeting in mid-March.

Interest rates influence various financial aspects, including credit card debt, mortgage rates and savings accounts. The Federal Reserve adjusts these rates based on economic conditions such as inflation and unemployment, impacting how much banks pay for deposits.

"Interest rates have been elevated for the past few years and clients should really be looking to take advantage of that for their short-term savings," said Brandon King, head of Personal Investor Cash at Vanguard.

High-yield savings accounts and money market accounts are options for consumers looking to earn higher interest rates on their savings. These accounts often offer better returns than standard savings accounts, although they may come with restrictions such as limited withdrawals or minimum balance requirements.

RELATED STORY | Affordable apartment caution: How to avoid being ripped off looking for a rental

A recent Vanguard survey revealed that 50% of respondents saving money are not earning 3% or more interest on their cash, indicating potential missed opportunities for higher returns.

Interest on savings accounts is typically compounded, meaning it is calculated on the initial principal and also on the accumulated interest from previous periods. This can enhance the overall return if the interest is reinvested.

While high-yield savings accounts are beneficial for emergency funds and short-term savings goals, they may not be ideal for accounts used for daily expenses due to withdrawal limitations.

This story was initially reported by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.