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Returns to certificates of deposit (CD) are high at the moment. You can lock in APYs as low as 4.60% with major financial institutions for three years. And, this is important given the current economic climate and interest rate environment.
As inflation cools, economists expect rates to start coming down. And, when they do, earnings on deposit accounts can drop. So, opening a 3-year CD now it can be useful. This is especially true if you have $10,000 in savings that you want to earn a significant return on. But if you decide $10,000 in a 3-year CD, you will have to leave it there until the account matures. If not, you can pay one early withdrawal penaltydefeating the purpose of opening the CD in the first place.
So you have to decide $10,000 in a 3-year CD now? We asked some experts for their thoughts.
See how much interest you can earn on a top 3-year CD here.
Should you put $10,000 into a 3-year CD this July?
There they are multiple reasons to put $10,000 into a 3-year CD. Here’s why the experts we spoke to say you should do it now:
This may be your last chance to lock in such high CD rates for a while
The Federal Reserve’s federal funds rate is a popular benchmark for consumer interest rates. So if the Fed lowers its federal funds rate, financial institutions may start paying lower APYs on deposit accounts like CDs. And, with cooling with inflation, this is a real possibility in the near term. So you may be running out of time to lock in today’s high rates.
“With the Fed’s recent comments, today may be the last chance for quite some time to lock in rates as they begin to fall in the near term,” explains Nick Covyeau, CFP, owner and financial planner at the firm financial planning. , Financial Swell. “That’s a guarantee that high-yield savings accounts can’t offer as their rates can change.”
Lock in today’s high returns with a 3-year CD before they expire.
CDs are safe
It can be challenging to earn a solid return on your money while maintaining safety. But CDs are currently the exception to this rule.
“A CD is a safe and effective way to grow your money,” says Covyeau.
The rates of return on these accounts are currently high — though they may not last — and CDs typically come with FDIC or NCUA insurance for balances up to $250,000. So as long as you maintain a balance below this insurance limit, your money is safeeven if the financial institution you open your account with is not.
CDs offer a passive savings option
You may need to take an active approach with other savings options. But, CDs give you a way to take a passive approach earning money from your savings.
“If you want to ‘set it and forget it,’ this is one of the rare times that lets you,” explains Noah Damsky, principal at financial planning firm Marina Wealth Advisors. “Park it, come back in three years and enjoy the growth.”
He explains that this is a strong approach for certain savings goals. For example, “if you’re saving for a down payment and your savings strategy says you’ll be ready in 3-5 years to buy, save it in a 3-year CD,” says Damsky. “It helps you lock it in at favorable interest rates so it’s on autopilot.”
This could also be one strong option if you are close to retirement.
“Maybe you’ll retire, start using Social Security or sign up for Medicare in a few years,” says Damsky. “With a CD, you can earn a competitive interest rate while maintaining flexibility for the next milestone.”
Open a CD now to take advantage of passive income generation.
After all
If you’re looking for a safe way to earn a meaningful return on $10,000, consider depositing it in a 3-year CD. Experts we spoke to say the time to earn strong returns today in these accounts may soon be over given the current interest rate environment. And, CDs are safe, passive ways to make your money work for you. Deposit $10,000 into a CD today to make more of your money.