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In today’s cooled but still inflationary economy, in which interest rates are at their highest point in decades, there aren’t many borrowing options worth pursuing. When it comes to saving and earning elevated interest rates, however, there are many account types to choose from, ranging from high-yield savings to money market to certificates of deposit (CD) accounts. All three accounts offer savers safe and effective ways to grow their funds.
CDs, especially, come with some of the highest rates possible. And those rates are locked, allowing savers to accurately determine how much they’ll have earned once their CD has matured. Some savers have elected to choose short-term CDs (which expire in less than 12 months) to earn higher interest rates in a condensed time frame. But is a 6-month CD worth it now, particularly for a five-figure deposit like $10,000? That’s what we will detail below.
See how much you could make with a $10,000 CD deposit here.
Is a $10,000 6-month CD worth it now?
Here are three reasons why a $10,000 deposit into a 6-month CD may be the right fit for your current financial needs:
It won’t lock up your money for long
While all CD accounts will lock your money away for a pre-determined period, 6-month CDs only do so for half a year, allowing you the flexibility to move your funds elsewhere after the CD has matured. This is particularly important in today’s rate climate, in which both interest rate hikes and interest rate cuts are in play.
If interest rates are cut during those six months, you’ll still earn the higher rate you opened the account with. But, if they’re raised, you’ll only need to wait a few months for your CD to mature to take advantage of the new higher rate. And, in the interim, you’ll earn 5% or more on your money — many times more than the 0.45% rate savers can get with traditional savings accounts right now.
Get started with a top 6-month CD online now.
It’ll help you overcome rate uncertainty
Not only are rates on traditional savings accounts much lower than CDs right now, but those rates are variable. So they could drop even further in the months to come. And while high-yield savings accounts have elevated rates, they also adjust frequently based on market conditions.
And no one even knows what market conditions to expect this summer. With inflation still more than a point above the Federal Reserve’s target 2% goal, and with just one Fed meeting scheduled between now and the end of July, savers may be able to better overcome today’s rate market uncertainty by depositing $10,000 into a 6-month CD than they would with another account type.
You’ll earn hundreds of dollars
Some of the top 6-month CDs offer rates between 5% and 5.35% right now. That’s equivalent to $246 to $264 earned simply by depositing $10,000 into one of these accounts now. And if you want to deposit more money or spend time looking around for a 6-month CD with an even higher rate, you’ll earn even more.
Just understand that you may have to pay taxes on CD interest earned, so you’ll want to weigh the pros and cons carefully. Still, if you’re looking for a safe and predictable way to earn a few hundred dollars, a $10,000, 6-month CD is a smart option to pursue.
The bottom line
A $10,000 deposit into a 6-month CD is a smart and safe way to grow and protect your money right now. By doing so, you won’t lock up your funds for an extended period but you’ll still overcome some rate uncertainty during that period. Finally, you stand to earn hundreds of dollars (if not more), depending on the lender used. For all these reasons and when compared to multiple alternatives, it can be valuable to open a CD with this amount and in this term right now. Just be sure to weigh the pros and cons of a CD account against your broader financial goals as an early withdrawal of your money could result in a penalty.
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
