It's time for stretching your dollar.
Now where we give you tangible tips to help you make the most of your money
as the FED continues to raise rates to combat inflation.
Silver lining is that higher rates do apply to savings
as well as money borrowed.
So if you want your money to work for you a little bit harder,
but you're not yet prepared to invest in the
stock market or even make investments in bonds,
parking your money in a certificate of deposit or CD can be a good option.
Joining me now is Katherine Togo, Chief Content Officer,
her money at personal finance website.
Catherine is always good to see you.
And what do we, what do we need to know about a certificate of deposit or CD?
And how does it work?
Yeah.
So a C D is known as a time deposit account
because it pays a fixed interest rate over a set period.
And that period generally ranges from 30 days to five years.
Most people choose a one year option and you can earn right
now up to 5% on that one year C D option.
But if you take your money out before the period ends, you'll pay an early with
penalty fee.
So cds are not great for people who need their money immediately liquid right now.
So 5% that is a pretty decent return in this environment.
Katherine, we did hear from the Fed chair earlier this week,
Tuesday and Wednesday saying that rates likely to go even higher.
Is there the expectation that we might see those
rates on cds even surpass 5% in the future?
Yeah. You know, I think maybe, I don't know that they would go much past five or 6%.
Um Right now the one year rate is 5% the six month CD is around 3%.
But at that point,
you're really better off with a high yield
savings account which are paying around 4%.
And in terms of waiting to open a C D,
I actually do think the fed is going to raise rates again because I've been
listening to Powell very closely and I believe what he says at this point.
Um, so you might be able to get a better rate if you wait because once you open that CD,
you're locked into a fixed and guaranteed rate no matter what interest rates do.
Now, in some cases, you might lock in a C D at a rate just before the rates go down.
So you basically win, right? You got one in under the wire before the rates went down.
But in an interest rate environment.
Like the one we're in today,
there's a risk that you could lock in a rate right before they
go up and no one wants to feel that they did that.
No one wants to feel like, oh, if I just waited,
but these things are really hard to time.
So I would say if a CD is an asset on your radar,
go for it or maybe see where things go at the end of the month and then,
and then take the plunge.
Um I think that's good advice. Captain.
Of course, the more info we get from the Fed,
I think the better just in terms of planning here.
So let's say today you're prepared to put money in a CD.
Then let's say we hear from the Fed chair in
another two weeks time and you want to add money.
Can you add money to that CD that you previously invested in
or do you open a brand new CD down the road?
Yeah, in general C D s do not allow you to add to your balance.
Once you make that initial deposit,
the cds balance is locked in to keep earning
interest until it reaches its date of maturity.
And the fact that you can't move things around and make changes whenever you like
is actually why cds offer those highest interest
rates because they're very low maintenance for,
for the banks that are offering them.
But you can absolutely open a new CD with money
and get that higher interest rate on that particular CD.
Okay, good to know.
We have some CD rates here on the screen capital
while you mentioned 5% Marcus by Goldman Sachs at 4.5%.
A few other ones in between. What about other savings vehicles, Catherine?
Quickly, we have just about 40 minutes left
that people should consider in this environment.
Yeah.
So to get the most continually updated list of interest rates,
there's a list at bankrate dot com which I love
to check on for cds and high yield savings account.
Um Just keep in mind with the C D, your money is tied up for that term specified.
So you can't take your money out without paying a penalty.
Um If you are looking to have liquid assets that you can be more
fluid with high yield savings accounts are right now at around 4% you can
get your money in and out any time and then there's treasury bills which
are paying around the same as a C D 5% for one year,
but you have to have an account at Treasury direct dot gov and that
can take time to set up and we've heard can be a hassle.
So keep that in mind,
but a lot of options right now to earn more interest than we've seen in a long time,
which is great for consumers.
Alright, Katherine Tuggle Chief Content officer of her Money. Kathryn.
Always good to see you. Thank you.