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Withdrawing $10,000 from your savings account to deposit it elsewhere is not a step you should take lightly. It can take a longer period of time to build up these savings, so accessing these funds must be approached strategically and carefully, especially in today’s cooling interest rate environment. Of inflation dramatically lower than what it was two years ago, the federal funds rate has been lowered several times since then. The next and final rate cut of 2024 is widely expected when the Federal Reserve meets again on December 17 and 18.
In this climate, savers should consider putting £10,000 into a savings pot certificate of deposit (CD) account. And they should strongly consider putting it on a long-term CD that expires in more than twelve months. Below we explain why.
See here how much more interest you can earn on your money with a long-term CD.
Why you should open a $10,000 long-term CD before 2025
A $10,000 deposit into a long-term CD is a significant financial commitment, thanks to the fixed nature of CD rates and the early withdrawal penalties savers will have to pay to gain early access to their money. That said, it could still be a beneficial move heading into 2025 for the following reasons:
It could earn you thousands of dollars in interest
A 2-year CD now has an interest rate of 4.25%, while a 3-year CD has the same rate. That amounts to $868.06 and $1,329.26 on account respectively maturity. If you deposit more money or search for longer term or higher rate, you earn even more. Compare that to the unpredictable returns you may rely on tied to other savings accounts and investments, and the benefits of a $10,000 long-term CD become even more apparent. That said, if you’re looking for the highest rates and the best terms, using a online bank to obtain both.
Get started online now with a top CD account.
It won’t become less valuable if interest rates are lowered
Interest rate cuts can be a big incentive for borrowers, while causing major headaches for savers. With rates on traditional savings accounts and savings accounts with a high return Although returns are variable, it appears that the returns savers earn from the money in these accounts will decline in the coming weeks and months. The same cannot be said for long-term CDs. If you open one at one of the rates mentioned above – and the rates are reduced in 2025 – that $868.06 or $1,329.26 remains the same. In an unpredictable economic climate, this certainty and predictability are an important characteristic.
It protects you against market fluctuations – and unnecessary expenses
You can spend $10,000 in a much shorter period of time than it took to accumulate it. So it can be useful to protect that money, both from inevitable market fluctuations and adjustments that will occur in 2025 and beyond – and from your unnecessary spending habits. For many savers, if they have access to the money, they will use it. However, if they don’t, they will learn better ways to manage their existing funds. And a long-term CD, with hefty early withdrawal penalties that could wipe out any interest earned so far, is a good way to encourage these healthier spending habits.
The bottom line
A $10,000 long-term CD undoubtedly requires commitment from savers. But it can be well worth the reward. With returns that can exceed $1,300 at maturity, built-in value that alternative accounts don’t have, and protection against both market fluctuations and the temptation to overspend, a $10,000 long-term CD now offers multiple benefits for savers. Make sure the amount deposited and the term chosen closely match your long-term financial goals to avoid early withdrawal penalties. For some savers, a different deposit or term may be more advantageous.
Learn more about your current CD options here.
