The economy has been full of uncertainty this year, from inflation and layoffs to recession concerns. In the midst of this, certificates of deposit (CDs) offer a more stable savings option. While not as attention-grabbing as crypto or stock trading, CDs are reliable during unpredictable times.
A CD locks in your annual percentage yield (APY) from the start, which means you know exactly how much you’ll earn regardless of changes in interest rates. With the Federal Reserve likely to lower rates soon, opening a CD now could help you lock in an APY up to 4.50% and protect your savings from inflation. Plus, CDs opened at FDIC- or NCUA-insured institutions are protected up to $250,000.
For specific goals like buying a car or planning a wedding, CDs can be a good choice if you don’t need access to the funds before the term ends. However, withdrawing early may result in penalties that reduce your returns.
If you’re saving for emergencies, a high-yield savings account (HYSA) might be better. Though APYs on HYSAs can change, they allow penalty-free access to your money and often offer rates similar to CDs. You can also continue adding to your balance over time, unlike most CDs, which require a lump sum at the start.
