CDs and savings accounts: Why you should open both now
It's never a bad idea to look for ways to protect and grow your money. But in an economy still coping with the nagging effects of inflation — and the high interest rates to combat it — saving and securing your money is even more important. Fortunately, there are multiple ways to do just that, often online and from the comfort of your own home.
By opening a certificate of deposit (CD) or high-yield savings account, depositors can secure their money from market volatility and boost it at a significantly higher interest rate than they would have if they left it untouched in a regular account. While both CDs and savings accounts have unique features, there's a compelling case to open both types simultaneously in today's economy.
Start by exploring high-yield savings accounts here now to see how much more you could be earning.
Why you should open a CD and savings account now
Here are three reasons why you should open both a CD and savings account now.
To take advantage of the rate environment
The average rate on a regular savings account is around 0.42% currently, according to the FDIC. But you can get exponentially higher with a CD or a high-yield savings account. There are some accounts that offer 12 times the national average. Since rates on both accounts are comparable it may make sense to open both together. CDs, in particular, will lock your money away at a high rate for the duration of its term, regardless of any larger rate volatility. High-yield savings accounts, meanwhile, have adjustable interest rates but offer the flexibility and terms of use you're already accustomed to with a regular savings account. So consider opening both and start earning interest at very high rates now.
Explore your CD options here to learn more.
To help build an emergency fund
Both high-yield savings accounts and CDs can greatly expedite your savings goals and help you build an emergency fund more rapidly. By putting money into a high-yield account you can earn more on your hard-earned money while maintaining access to it for a rainy day. While you may not be able to withdraw your funds from a CD as easily (unless you opt for a no-penalty CD), these accounts can also help build an emergency fund, if only because they won't be subject to the same cycle of deposits and withdrawals your other accounts are. Ideally, you can split the funds you would put into one account and put half into each type. This will grow your emergency fund quicker while still providing access should you need it for an emergency earlier than expected.
To protect your money long-term
Bank failures earlier this year frightened the stock market and had many investors turning to more traditional investment types like gold. But both CDs and high-yield savings accounts are FDIC-insured up to $250,000 per account, per bank. So you can invest in both with a sense of peace and security that you might not have with some other options. And if you have more than that $250,000 to save, you can split it so that the protections remain intact across both account types. If you just deposit the total amount in one account and surpass the maximum, you'll leave the balance unprotected. So, instead, open both account types and double up your protections.
Check savings account options here now to learn more.
The bottom line
Both CDs and high-yield savings accounts offer savers benefits that many other accounts don't. So why not take advantage of both by opening one of each? By opening both a savings account and a CD at the same time savers can truly benefit from today's high rate environment and earn significantly more interest on their money. They can also use both accounts as a way to grow emergency savings — a CD for the long term and a high-yield account for immediate, urgent needs. And they can double their FDIC protection by opening both account types up to the maximum amount that's insurable — or split the difference if they have above the $250,000 protection limit.
