Opening a CD now could give you this much extra cash for the next holiday season
Celebrating the holidays can be a much bigger expense than some people bargain for when you factor in gifts, travel, food and other miscellaneous costs. While it may be too late to set your sights on the 2023 holiday season, there is a move you can make right now that will leave you with extra cash when the 2024 holidays roll around.
All you need is some cash from your savings and a few minutes to open a certificate of deposit (CD).
Start exploring CD options today to have some extra cash next year.
Opening a CD now could give you this much extra cash for the next holiday season
If you want to get a jump start on saving for your 2024 holiday plans, opening a CD now will result in returns by the time you're carving the turkey next year. Here's how it works.
CD basics
Before you open a certificate of deposit for the holidays, it's important to make sure you understand how they work.
A CD is essentially an account you open with a bank, and upon opening, you agree to leave your money deposited in the account for a set period of time in exchange for earning interest. And, CD interest rates are normally higher than you would get with some other savings products, like regular savings accounts. If you take the money out of the CD before the term is up, you will normally have to pay an early withdrawal penalty.
There are many different CD term lengths available, but these terms generally last between a few months to a few years on average. Note, though, that CD rates vary based on the bank you are using. For example, online-only financial institutions can generally offer higher rates than traditional banks, as they don't have the same overhead costs that brick-and-mortar banks have. In turn, online banks can generally offer higher interest rates to customers.
Open a CD today to start earning interest.
How much you could earn with a CD by the next holiday season
Let's look at how much money you could earn by the 2024 holiday season if you opened a CD now.
If the goal is to earn money for the next holiday season, it makes sense to open a 1-year CD. Right now, you can get rates of up to 5.67% on this CD term. If you put $1,000 into a 1-year CD right now with an interest rate of 5.67%, you'd earn about $56 dollars in interest by next year.
Now let's say that you have $5,000 in savings that you won't need access to in the next year. Putting that $5,000 into a 1-year CD with a 5.67% interest rate today would result in more than $283 in earned interest by the end of the term. And, if you deposited $10,000, your interest earrings would be about $567 by the end of the year.
How much you could earn with a CD for future holiday seasons
You can also take a longer-term approach. Right now, you can find interest rates of up to 4.75% on a 5-year CD. Here's how much that could earn you in interest by the end of the term if you deposited your savings into a 5-year CD today:
- $1,000 deposit: $246.18
- $5,000 deposit: $1,230.91
- $10,000 deposit: $2,461.82
The bottom line
We could all use a bit of extra money around the holidays. If you have cash currently sitting in a checking account or regular savings account, you could put it in a CD today and earn interest that you can use for the next holiday season. You could also think longer-term and use a 5-year CD to start earning more interest on your money.
