Should you open a CD or savings account? Here’s what the experts recommend.

High yield savings And Certificate of Deposit (CD) Accounts can be a smart way to both save and grow your money — especially in today’s rising interest rate environment. But when is one the right choice over the other? And which one will help you make the most of your hard-earned cash in the long run?

We asked some experts for their thoughts on how to choose the right account.

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When experts say to open a CD (and why)

Certificate of Deposit Account — or CDs — are investments you want to keep their terms Most banks last anywhere from three months to five years, and to get the full interest promised when you buy it, you have to Leave the CD untouched for the entirety of that term.

If you dip into your CD funds before the account matures, you’ll usually pay a hefty penalty — often a year’s worth of interest payments or more. For this reason, CDs are best if you use cash for a while. As Seth Diner, personal wealth manager at Diner Money Management, explains, “A CD is a good choice when you have a specific financial goal in mind and can afford to lock up your funds.”

CD is also smart If you want to maximize your interest, because they usually offer a higher interest rate than most savings accounts. Some of the best CD accounts Currently the offer rate is above 5%. High yield savings are interest rates in the 3% and 4% range.

Finally, since certificates of deposit account guarantee you a locked-in rate for months or even years (while savings accounts do not), you may want to Open a CD If you think interest rates will drop soon.

“CDs will be a good choice when interest rates are more likely to fall in the not-too-distant future,” said Donald Mindiak, president and CEO of First Commerce Bank.

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When Experts Say to Open a Savings Account (And Why)

If you need access to your cash without penalty, say experts A high-yield savings account Your best bet. They are also a good option if you need to build an emergency fund.

“A high-yield savings account is flexible, meaning if you think your funds will be accessible, a high-yield savings account will allow you to withdraw your funds at any time without penalty,” said Chicago Tyler, chief financial officer at California Bank and Trust. “If you have extra funds you can add to a high-yield savings account.”

That last part is important, because CDs don’t allow you to add more funds after the fact. What you put into your CD account at the beginning is what you earn interest over the entire term.

You can ask for one High Yield Savings Account If you think rates may increase in the future. CD rates are set in stone. Savings account rates, on the other hand, ebb and flow with the market. If rates rise down the line, that means more interest earned in the long run (it can also mean the opposite, though, if rates fall).

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When Experts Say to Open Both (and Why)

If you have funds you can open both High Yield Savings Account and a CD. This can be a good move if you want to diversify your investments and save for both short and long term goals.

“Diversification can be achieved by opening both a CD and a high-yield savings account, with the CD providing stability and a fixed return, while the savings account provides liquidity,” Diener says. “This approach can balance long-term savings goals with short-term needs and maximize potential interest earnings on a larger savings balance.”

It can also be wise if you want to ensure you weather a potential economic storm.

“Investing in both CDs and high-rate savings accounts allows you to maximize your savings while keeping some assets liquid,” says Chris Moore, director of deposit and payment strategy at Alliant Credit Union. “This could prove beneficial in turbulent financial times.”

When to explore other options

If you want to get the biggest possible return for your money, you may want to consider other investments. While CDs and high-yield savings accounts can provide steady interest over time, they generally won’t provide as large returns as riskier investments like stocks.

If you’re not sure which account to open or where to invest your money, talk to a financial professional. They can help you assess your goals and budget and point you toward the best materials for your money in the long run.