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Why you should invest $20,000 in a 5-year CD now

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The impressive returns you can earn on a CD are just one reason to consider these solid savings vehicles.

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A certificate of deposit (CD) is a sure way to make your money grow. And given the current high interest rate environment, returns on these savings vehicles are difficult to ignore. But these high rates won’t last forever.

Today’s high interest rates are the result of The Federal Reserve’s Efforts to Combat High Levels of Inflation. As inflation continues to calm Across the country, there is growing belief that rates will fall at some point in the new year. So it may be wise to hold today’s rates while you still can.

Open a 5-year CD now to benefit from today’s impressive returns.

Why you should invest $20,000 in a 5-year CD now

There are several reasons why you should consider investing $20,000 in a 5-year CD right now. These include:

CD returns are impressive

The Federal Reserve has raised its target federal funds rate 11 times since mid-2022 in an effort to combat inflation. This is important for CDs because the the federal funds rate is the basis for rates on deposit accounts.

Some best 5 year CD options on the market now offer APYs above 4.5%. What does it mean if you deposit $20,000? Here’s how much money you can earn:

  • $20,000 at 4.5% APY: $4,923.64 in interest (for a total of $24,923.64 after five years)
  • $20,000 at 4.55% APY: $4,983.32 in interest (for a total of $24,983.32 after five years)
  • $20,000 at 4.60% APY: $5,043.12 in interest (for a total of $25,043.12 after five years)

Take advantage of today’s awesome prices with a CD now.

You can lock in today’s rates

Recent data has shown that inflation is slowing across the country. Since high inflation is driving increases in the federal funds rate, we could see rate cuts if inflation continues to slow. In fact, most experts believe the Federal Reserve will begin cutting rates at some point in 2024.

Once the Federal Reserve begins reducing its target federal funds rate, you can expect CD rates to begin to fall. But you don’t have to settle for lower returns.

When you open a 5 year old CD today, you Take advantage of today’s high rates for the next five years. After all, CDs come with a fixed rate of return that isn’t affected by market or economic conditions once you open your account.

CDs protect your money

Safety is a key consideration when it comes to finding a home for your savings. After all, you want to make sure that the money you deposit now will be available later. The good news is that CDs are virtually risk-free for two reasons :

  • They come with deposit insurance: Most CDs come with FDIC or NCUA insurance on balances up to $250,000 per depositor per account. This means that the financial institution holding your money could go out of business and you would still get your money back. This would simply be part of an insurance claim.
  • CDs are not sensitive to changes in the market or economy: Once you open your CD, you lock in your rate of return for the life of the account. This rate of return is not affected by changes in the market or economic conditions, providing a level of predictability unmatched by most other investment and savings vehicles.

What if you don’t have $20,000 to invest in a 5-year CD?

You don’t have to put $20,000 down on a 5-year CD. The benefits of these savings vehicles are the same whether you invest $20,000 or $5,000. The only difference is the total amount you can win.

For example, here is what you can expect to earn by depositing $5,000 into a leading 5-year CD on the market today:

  • $5,000 at 4.5% APY: $1,230.91 in interest (for a total of $6,230.91 after five years)
  • $5,000 at 4.55% APY: $1,245.83 in interest (for a total of $6,245.83 after five years)
  • $5,000 at 4.60% APY: $1,260.78 in interest (for a total of $6,260.78 after five years)

The essential

CDs offer impressive returns given today’s high interest rate environment. However, these impressive returns might not last for too long. Consider holding them with a 5-year CD now to ensure your money will work hard for you for years to come.

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