How much money should I put in a CD?

Interest rates are high and look unlikely to come down anytime soon The Fed’s latest rate hikeMade earlier this month, the tenth increase from March 2022.

While this isn’t good news for prospective homebuyers or current owners looking to refinance, it’s a silver lining for those with money in deposit vehicles. High yield savings And Certificate of Deposit (CD) Rates on both accounts are significantly higher than in recent years, giving savers a rare opportunity to grow and protect their money in an otherwise uneven economy.

That said, to get the most out of these accounts, it’s helpful to understand how much to deposit first Although everyone’s personal financial situation is different, there are some reliable ways for savers to determine how much money they should put into a CD.

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How much money should I put in a CD?

You usually need to deposit a minimum amount on a CD to open it. This is usually between $500 and $1,000 depending on the bank used. But is it enough? Or should you save more money, especially when you can earn 4% to 5% interest in today’s economy?

Here are three things to consider when trying to determine how much money you should put into a CD.

Your access to money

How much money can you comfortably part with on a CD? Remember, the CD rate and your money are locked in duration When you make a deposit you agree. If you need the money before the end of the term, some — or all — of the interest you’ve earned up to that point must be forfeited. So, make sure you budget accordingly before putting money away. The amount of money you deposit may be equal to the amount of money you don’t need right now.

If you don’t feel comfortable locking money away, then Consider a high yield savings account instead. Have high yield savings accounts Similar interest rates As a CD but you will still be able to make deposits and withdrawals as needed.

Check your high-yield savings options here now.

your goals

What are you trying to achieve by opening a CD? Are you just looking to take advantage of the rate climate? Or did you intentionally turn to a CD as a way to protect your money from an endless cycle of deposits and withdrawals? By knowing your goal in advance, you will be better able to determine how much money to deposit.

For example, you may want to put more money in a short-term CD if the goal is to earn interest as quickly as possible. More money in the account equals more interest earned. But maybe you’ve already saved enough for a rainy day and want to lock away an exact amount until you need it. In this case, it may make sense to make a minimum deposit and keep the rest of your money available for daily use.

Only you know your goals and what you are comfortable with. Understand both before opening the CD.

Your emergency fund

do you have one emergency fund Ready to go when you need it? In this case, feel free to put more money into a CD. A CD, after all, is not a great one A place to store your emergency fund Because you never know when you’ll need it. But if you already have that base covered with a high-yield savings account or some other account type, you can freely deposit as much as you want with a CD. Conversely, if you don’t have an emergency fund (or if you do and don’t have much in it), you’re better off splitting the difference by putting some extra in the fund and some in a short-term CD.

Explore your CD options here now to learn more

Bottom line

CDs can offer depositors an effective way to protect and grow their money in a volatile economy. However, to maximize their account, it helps savers narrow down the exact amount they wish to deposit. They can do this by taking a realistic review of how they will access their money (since they won’t be able to tap into it sooner without penalty). They must understand their goals and reasons for opening the CD in the first place. Finally, they should consider how much money they have saved for emergencies. If that amount is high, they can comfortably lock more money into a CD. If not, however, they will have to rework the deposit amount.