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When considering the right savings account, timing plays a key role. If you savings account with high returns or certificate of deposit (CD) account in the spring of 2020 or 2021 you would have seen a negligible return on your investment. But as the economy developed, inflation grew and the federal funds interest increased. This resulted in exponential growth in returns on both account types. Now the rates on both accounts are fluctuating nearby 5% or higher.
That noted, inflation has cooled significantly since reaching a multi-decade high in June 2022. And if interest rates continue to fall, a reduction in the Federal Funds Rate could become possible. While that would be good news for borrowers, it won’t be so good for savers. This underlines the importance of opening these accounts now, and there are compelling reasons why you might want to open a CD section in June. Below we highlight three of them.
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Why you should open a CD in June
In a rapidly changing climate, it is important to know when to intervene and when to exercise restraint. If you understand that, here are three reasons why you should consider opening a CD this June.
The rates are already high
It’s not hard to find a CD with a rate of 5% or higher right now, especially if you’re willing to open an account with a online bank. That equates to $5 you earn for every $100 you deposit, simply in exchange for transferring some of your money to one of these accounts. However, to get the full return, you must be willing to leave your money untouched in the account until the full return is achieved. CD term has matured. But that may be a reasonable compromise for many, especially when you compare it to the minimum average interest rate of 0.45% that now comes with regular savings accounts.
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Rates could rise again
The next inflation report is expected to be released on June 11 and the Federal Reserve will meet that day and also on June 12. If the numbers in the first are still too high, don’t be surprised if the Fed raises rates the next day. But even if they just hint at an upcoming rate hike, that could be enough to increase the interest rate lenders offer on their CD accounts. After all, while the Fed doesn’t directly dictate what lenders offer, it does influence the rates they offer customers. So make sure you’re ready to take action – or think about it – by then fix a rate now before an announcement negatively impacts what you could otherwise have secured.
It is a safe way to protect your money
Not alone is one CD safe against possible bank failures (the FDIC is insured up to $250,000 per account, per lender), but it’s also a way to protect against what might otherwise have been an endless cycle of withdrawals and deposits. And with inflation still persistent and the costs of daily living unaffordable, the chances of accessing this money are often high. But with one early withdrawal penalty As an incentive to wait, you may save more money than if you had flexible access. That’s a big plus in June and most other months and seasons too.
it comes down to
If you’ve missed the opportunity to earn substantial returns on CDs in recent years, be prepared to take action before June. Interest rates on these accounts are already high, but could rise further based on a new inflation report and the Federal Reserve’s mid-month meeting. And with effective ways to protect your money in the current inflationary climate in short supply, it may be wise for savers to act now while these accounts are still affordable.
