With a Federal Reserve interest-rate cut on the horizon, the allure of easy, predictable yields from cash may be fading. But uncertainties lurking in the economy should prompt people to keep building their savings, financial advisers say.
It’s important to build easy-to-tap, rainy-day reserves — particularly at a time when it’s taking longer for many unemployed people to find work. It’s equally important to avoid going overboard, experts say — and to remember that cash yields alone aren’t going to cut it over the long run.
As people determine the best ways to put their money to use, deciding how deep to stay in cash will be a key consideration going forward, they note.
Financial advisers highlighted this balancing act after Federal Reserve Chair Jerome Powell signaled openness to the year’s first interest-rate cut as early as September. While the Fed’s preferred inflation gauge on Friday showed prices nudging higher in July, the increases may not be sharp enough to steer the central bank away from announcing a rate cut at its next meeting.
Queasiness about the job market isn’t fading, which keeps the savings mission in focus.
In his Jackson Hole, Wyo., speech earlier this month, Powell said the weakening job market had informed his willingness to consider a rate cut. The U.S. economy added a lower-than-expected number of jobs in July, while the government made eye-popping downward revisions to job gains for June and May. The August jobs report comes out this Friday.
Consumer pessimism about the job market also grew in August. Meanwhile, workers’ confidence about their employers’ immediate future hovered near a record low in August, according to a running index by the job-search platform Glassdoor.
It’s been roughly nine months since the Fed completed its first string of reductions to its benchmark interest rate. Before those three cuts, the central bank raised its rate to an approximately two-decade high in order to fight stubbornly elevated inflation.
Now, traders widely expect the Fed to lower its rate to a range of 4% to 4.25% at its Sept. 16-17 meeting, down from its current range of 4.25% to 4.5%. The Fed’s higher rate pushed up yields on certificates of deposit, savings accounts and money-market mutual funds, burnishing the appeal of these superlow-risk investment vehicles. It’s common to find yields on these products hovering around 4% now.
Americans’ personal-saving rate — the share of disposable income that people save after spending money and paying taxes — was 4.4% in July, unchanged from the previous month, according to Bureau of Economic Analysis data released Friday.
In the current economic environment, financial planner Mark Stancato said he’s OK playing it conservatively and having a bit more in cash accounts such as high-yield savings accounts.
For Stancato, the owner of VIP Wealth Advisors in Decatur, Ga., Powell’s recent warnings about a weakening labor market reinforced the message he has been telling clients. “Cash isn’t just an asset class; it’s optionality,” he said. “In uncertain job markets, having six to 12 months of reserves is freedom, not fear.”
The question of how much to keep in savings — three months’ worth of expenses, six months or more — will depend on a person’s expenses, how many members of their household are working and how difficult they think it would be to find another job, he said. One year’s worth of expenses would be the outer limits of what he’d recommend, depending on the circumstances.
From the archives (April 2025): Experts now recommend a 12-month emergency fund. Here’s how to quickly save thousands in cash.
After that, it gets costly to have too much money in cash when it could be better utilized building wealth in the stock market for the long term. The S&P 500 SPX is up nearly 10% for the year to date.
“So yes, keep your war chest — but don’t confuse dry powder with a forever parking spot,” Stancato said.
To be sure, people have long balanced smaller, low-risk returns against larger, riskier investments. But in the current moment, taking risks may be a hard sell for some given economic uncertainty, the psychological comforts of cash and the fact that interest rates haven’t looked this good in a while.
More people said they met or exceeded their savings goals in the second quarter of 2025 compared with the same period a year earlier, according to a Santander Bank survey released this month. Four in 10 people said their commitment to building their emergency savings has grown since the start of the year, the survey of nearly 2,300 people found.
Almost half of respondents (49%) to a Morning Consult survey conducted in July said they would be able to pay for an unplanned $400 expense with cash. That’s slightly down from 52% in the second quarter, but roughly in line with the firm’s polling on the question since early 2023.
It’s important to build those savings, but it’s also important to find a way to distinguish how much money you need for the long run and to keep that money out of cash, said Jared Gagne, a fiduciary wealth adviser at Claro Advisors in Boston.
“The big takeaway is that Powell’s comments reinforce that cash is currently valuable for short-term flexibility, but true long-term dollars need to be invested,” Gagne said.
In some respects, the way to think about cash doesn’t change regardless of where interest rates go next, said Greg McBride, chief financial analyst at Bankrate. Building up savings for emergencies and upcoming expenses — like a down payment for a house — remains important whether the rate is at 4% or 0.4%, he said.
Increasing savings takes focus and time, McBride noted. For many people, adequate savings are the “byproduct of years of consistency,” he said.
But CDs may hold less appeal for savers and investors once the Fed cuts rates, according to McBride. That’s because users would likely be getting yields that are lower than what they could reap now.
These deposits — where banks lock up money for a set period of time, in exchange for paying consumers a higher interest rate — became a darling for savers as the Fed increased its rates.
Their popularity has persisted: Americans had $2.88 trillion in CDs during the second quarter of 2025, according to the Federal Deposit Insurance Corp. That’s a slight increase from the first quarter, though lower than the high-water mark of $3 trillion during 2024’s third quarter.
“Yields are not going to get better by waiting,” McBride said. That may be particularly true for retirees or people nearing retirement, who are using CDs to protect their money while also reaping some interest.
CD Valet, a comparison-shopping website for the savings products, saw a wave of visits on the Monday following Powell’s speech, according to Mary Grace Roske, CD Valet’s head of marketing and communications.
The site has seen the downward creep in CD interest rates, she noted, with more than seven in 10 changes to CD rates advertised on the site in the past month having been reductions.
Before the Fed last started cutting rates in 2024, CD Valet saw banks reducing their rates in anticipation, Roske said. She hasn’t seen such a widespread move for CDs now — but as the next Fed meeting nears, she added, that could change.
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