Why you should put $15,000 into a CD right away
One of the biggest tricks in financial planning is figuring out a way to balance risk and reward. You want to make financial decisions that allow you to earn money, but you also want to minimize the risk of losing money.
While this can be a difficult balance to strike, there is one option out there that provides returns on your money with low risk: certificates of deposit (CDs). With a CD, you deposit your money at a bank for a predetermined amount of time — and in exchange, the bank offers you a locked-in interest rate for the full CD term. And, right now is an especially good time to consider opening a CD, as rates are very high.
Start shopping for a certificate of deposit today.
Why you should put $15,000 into a CD right away
There are a number of reasons why using a CD may be a smart part of your savings plan, including:
Rates are high right now
The key to using a CD as part of your savings plan is often to get the highest interest rate possible. If you aren't getting a competitive rate, you are losing out on interest earnings.
You don't need to worry about that right now, though, as overall, CD rates are high right now. Here are some sample interest rates you may be able to get based on CD term:
- 6-month CD: 5.55%
- 1-year CD: 5.67
- 3-year CD: 4.75%
- 5-year CD: 4.75%
Keep in mind that some of the highest rates are typically offered by online financial institutions. Traditional banks with physical branches have higher overhead for their brick-and-mortar locations. Online-only banks don't have to worry about those costs and can, in turn, pass those savings down to account holders in the form of higher rates.
Shop for a CD online right away.
Opening a CD locks in your rate
When you open a CD, you are guaranteed to earn interest at the advertised rate throughout the full CD term. Even if the rates a bank is offering for new CDs are lower, you will continue to earn the rate that you locked in when you opened the account.
For instance, let's say you open a 5-year CD with an interest rate of 4.50%. By the time the third year rolls around, the interest rate environment has drastically changed, and the bank is now only offering 2.75% for 5-year CDs. That won't impact you, and you'll continue to earn 4.50% interest for the rest of the CD term. This isn't the case with other products, like high-yield savings accounts, which have variable rates.
Earnings are predictable
When you open a CD, you can calculate how much interest you will earn over the course of the term. Here's how much interest you could earn for each of the CD terms noted above with a $15,000 deposit:
- 6-month CD at 5.55%: $410.63 (total value $15,410.63)
- 1-year CD at 5.67%: $850.50 (total value $15,850.50)
- 3-year CD at 4.75%: $2,240.64 (total value $17,240.64)
- 5-year CD at 4.75%: $3,917.40 (total value $18,917.40)
Start earning interest right away by opening a CD now.
The bottom line
A certificate of deposit offers you solid, predictable returns with little to no risk. Putting $15,000 into a CD right could result in big returns, no matter how long the CD term is. Just be sure that you don't need that money during the term of the CD, as there are generally significant penalties for early withdrawals.
