Delphine Poggianti/Getty Images
Taking $10,000 out of your savings account to deposit elsewhere is not a move to be taken lightly. It can take an extended period to build up these savings, so accessing these funds should be approached strategically and carefully, especially in today’s cooling interest rate climate. with inflation dramatically lower than it was two years ago, the federal funds rate since then it has been reduced several times. The next and final cut in 2024 is widely expected when the Federal Reserve meets again on December 17-18.
In this climate, then, savers should consider moving $10,000 to a certificate of deposit (CD) account.. And they should strongly consider depositing it in a long-term CD, one that matures in more than 12 months, specifically. Next, we’ll explain why.
See how much more interest you could earn on your money with a long-term CD here.
Why You Should Open a $10,000 Long-Term CD by 2025
A deposit of $10,000 in a long-term CD is a significant financial commitment, thanks to the fixed nature of CD rates and the penalties for early withdrawal savers will have to pay to access their money prematurely. That said, it can still be an advantageous move heading into 2025 for all of the following reasons:
It can earn you thousands of dollars in interest
A 2-year CD has an interest rate of 4.25% now, while a 3-year CD has the same rate. That equates to $868.06 and $1,329.26, respectively, on account maturity. If you deposit more money or search for more term or a higher rate, you’ll earn even more. Compare that to the unpredictable returns you can rely on linked to other savings and investment accounts and the benefits of a $10,000 long-term CD become even clearer. It has been noted that if you are looking for the highest rates and best terms, you may need to use a online bank to get both.
Get started with a Master CD account online now.
It won’t be less valuable as interest rates come down
Interest rate cuts can be a big boost for borrowers, while also causing a major headache for savers. With fees instead of traditional savings accounts and high yield savings accounts variable, the returns that savers earn on money in these accounts look set to shrink in the coming weeks and months. The same cannot be said for long-term CDs. If you open one at one of the rates listed above, and the rates drop in 2025, that $868.06 or $1,329.26 will remain the same. In an unpredictable economic climate, this security and predictability is an important feature.
It will protect you from market changes and unnecessary expenses
You can spend $10,000 in a much shorter period of time than it took to build it up. It can be beneficial, then, to protect that money from both the inevitable market changes and adjustments that will occur in 2025 and beyond, as well as your unnecessary spending habits. For many savers, if they have access to the money, they will use it. 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 all the interest earned so far, is a great way to encourage those healthier spending habits.
The bottom line
A $10,000 long-term CD certainly requires commitment from savers. But the reward may be worth it. With a return that can exceed $1,300 at account maturity, built-in value that alternative accounts lack, and protection against market swings and the temptation to overspend, a $10,000 long-term CD now offers multiple benefits for savers. Just make sure the amount deposited and the term you choose closely align with your long-term financial goals to avoid those early withdrawal penalties. For some savers, a different deposit or duration may be more advantageous.
Learn more about your current CD options here.