Stashing cash: 71% of Americans are setting more money aside amid recession fears, new report finds
Depending on how accessible you need your savings to be, here are some of the best ways to earn interest on your emergency money
Renewed fears of a possible recession have spurred more households to adjust their spending habits — finally.
Broadly, Americans are cutting back, particularly on discretionary purchases, and saving more, according to recent reports on the state of the consumer by the Bank of America Institute and Deloitte.
Now, 71% of Americans are likely to keep cash on hand, according to a new Country Financial security index.
To save more, about half of all adults are dining out less frequently and 42% have changed the way they shop for food, according to the Country Financial report, which was provided exclusively to CNBC before its general release Wednesday. Other consumers are driving less to save on gas or canceling some streaming services.
More from Personal Finance:
Credit card debt nears $1 trillion
3 financial risk areas for consumers to watch
Here's how much emergency savings you need
"With elevated inflation, Americans are doing what they can to make ends meet," said Chelsie Moore, a certified financial planner and director of wealth management solutions at Bloomington, Illinois-based Country Financial.
"A market of high interest rates is favoring savers versus spenders," she said. "This means those who are saving are getting paid more to do it."
Even as Americans are more likely to keep cash on hand, most said they don't know the best ways to save to reach their short- or long-term savings goals, according to Country Financial.
The best places to park your savings
These days, savers could get better returns on their cash than they have in years.
After a series of interest rate hikes from the Federal Reserve, top-yielding online savings account rates are now as high as 5%, the highest since 2008, according to Bankrate.com.
"The easiest thing to do," said CFP Ted Jenkin, founder and CEO of oXYGen Financial in Atlanta and a member of CNBC's Financial Advisor Council, is "look at moving money out of your checking account into a savings account."
Alternatives like Treasury bills, certificates of deposit or money market accounts have also emerged as competitive options for cash, although this may mean tying up your savings for a few months or more.
Jenkin recommends buying short-term, relatively risk-free Treasury bonds and laddering them to ensure you earn the best rates, a strategy that entails holding bonds to the end of their term.
Another option is to purchase federal Series I bonds, which are inflation-protected and nearly risk-free assets. The downside is that you can't redeem I bonds for one year, and you'll pay the last three months of interest if the bonds are cashed in before five years
I bonds are currently paying 4.3% through October, down from 6.89% last November.
Even though those rates have fallen significantly, "they will earn more than stuffing cash in a box under your bed," Moore said.
Subscribe to CNBC on YouTube.
This story originally appeared on: CNBC - Author:Jessica Dickler
