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Should you put $10,000 in a 3-year CD this July? Here’s what experts think.
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Returns on certificates of deposit (CDs) are high at the moment. You can lock in APYs as high as 4.60% with leading financial institutions for three years. And, that’s 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 may fall. So, opening a 3-year CD right now could be advantageous. That’s especially true if you have $10,000 in savings you’d like to earn a meaningful return on. But if you put $10,000 in a 3-year CD, you’ll have to leave it there until the account matures. If not, you may pay an early withdrawal penalty, defeating the purpose of opening the CD in the first place.
So, should you put $10,000 in a 3-year CD right now? We asked some experts their thoughts.
See how much interest you could earn on a top 3-year CD here.
Should you put $10,000 in a 3-year CD this July?
There are multiple reasons to put $10,000 into a 3-year CD. Here’s why the experts we spoke with say you should do so 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 cuts its federal funds rate, financial institutions may start paying lower APYs on deposit accounts like CDs. And, with inflation cooling, that’s 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 start coming down in the near future,” explains Nick Covyeau, CFP, owner and financial planner at the financial planning firm, Swell Financial. “This is a guarantee that high-yield savings accounts cannot offer as their rates are subject to change.”
Lock in today’s high returns with a 3-year CD before they’re gone.
CDs are safe
It can be challenging to earn a strong return on your money while maintaining safety. But, CDs are currently the exception to that rule.
“A CD is a safe and effective way to grow your money,” says Covyeau.
Return rates on these accounts are currently high – though they may not last – and CDs typically come with FDIC or NCUA insurance on balances up to $250,000. So, as long as you maintain a balance below this insurance cap, your money is safe, even if the financial institution you open your account with isn’t.
CDs offer a passive savings opportunity
You may have to take an active approach with other savings options. But, CDs give you a way to take a passive approach to earning money on your savings.
“If you want to ‘set it and forget it,’ this is one of the rare occasions that allow you to,” explains Noah Damsky, principal at the 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 strategy to save up says you’ll be ready in 3-5 years to buy, save it in a 3-year CD,” says Damsky. “This helps you to lock it away at favorable interest rates so it’s on autopilot.”
This may also be a strong option if you’re nearing retirement.
“Perhaps you’ll retire, start drawing on 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 upcoming milestone.”
Open a CD now to take advantage of passive income generation.
The bottom line
If you’re looking for a safe way to earn a meaningful return on $10,000, consider depositing it into a 3-year CD. The experts we spoke with say the time to to earn today’s strong returns on these accounts may soon end 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 earn more on your money.
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“We are providing this initial round of funding so there’s no delay getting roads repaired and reopened, and re-establishing critical routes,” said U.S. Transportation Secretary Pete Buttigieg in a statement. “The Biden-Harris administration will be with North Carolina every step of the way, and today’s emergency funding to help get transportation networks back up and running safely will be followed by additional federal resources.”
The storm caused rampant flooding that has devastated several towns and killed more than 225 people – with CBS News confirming at least 114 people killed in North Carolina. There was more than 8 inches of rain across the western North Carolina mountains, with some areas seeing more than a foot.
Hundreds of roads across Western North Carolina remain closed, leading to an increase in air traffic as teams scour the region for survivors by air. Air traffic over Western North Carolina has increased by 300% due to relief efforts since the storm cleared, the Federal Aviation Administration and the North Carolina Department of Transportation.
Mudslides blocked Interstate 40 and other highways in North Carolina and about 400 roads were closed due to damage from Helene. Interstate 40 was damaged at several locations, the Department of Transportation said.
President Biden visited the Carolinas on Wednesday, surveying the flood damage by air from Greenville, South Carolina, to Asheville, North Carolina. Mr. Biden announced the federal government would cover “100%” of all debris removal and emergency protective measure costs in North Carolina for six months.
The Department of Transportation said these relief funds will allow the North Carolina Department of Transportation to act more quickly to fund eligible repairs to their damaged facilities.
Li Cohen and
contributed to this report.
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Tropical Storm Milton forms in Gulf; forecast to strengthen into hurricane headed toward Florida
Tropical Storm Milton has formed in the Gulf of Mexico and is forecast to strengthen into a hurricane headed toward Florida with possible impacts to its western coast, the National Hurricane Center said on Saturday. Maximum sustained winds are expected to be at 40 mph with higher gusts and Milton is currently moving north-northeast, NHC said in an advisory.
Milton is forecast to undergo a period of rapid intensification before it makes landfall as a Category 2 hurricane across Florida’s west coast, CBS News Miami reported.
The forecast comes a little more than a week after Hurricane Helene made landfall in Florida and across the Southeast, killing more than 200 people and causing immense destruction. President Biden on Thursday took an aerial tour of Florida’s Big Bend where Helene struck as a Category 4 storm. Hundreds of people are still missing and Mr. Biden said the work to rebuild will cost “billions of dollars” as communities suffer still without power, running water and passable roads.
NOAA
Milton is forecast to move across the southwestern Gulf of Mexico through Sunday night then across the south-central Gulf on Monday and Tuesday before reaching Florida’s west coast by the middle of the week, NHC said. Heavy rain is possible in the region starting Sunday into Monday, CBS Miami reported, and more rain and heavy winds will most likely arrive on Wednesday. Hurricane and storm surge watches will most likely be required for portions of Florida starting Sunday, the National Hurricane Center said.
Along with the heavy rainfall, the hurricane center said to expect risks of flooding.
Residents in the area should ensure they have a hurricane plan in place, the National Hurricane Center said, follow the advice of local officials and check back for forecast updates.
