Why should you put $5000 in a 6-month CD now?

Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn .

Is it worth putting 5k in a CD?

For most people, the answer to that question is yes. It can make a lot of sense to put $5,000 into a 1-year CD right now — and there are a few different reasons for that. One of the primary reasons to consider a 1-year CD is the attractive interest rates currently available.

How much does a $5000 CD make in 6 months?

For reference, here's how much savers can currently expect to make with a $5,000 CD in six months, with three different interest rates: At 5.50%: $135.66 (for a total of $5,135.66 after six months) At 5.25%: $129.57 (for a total of $5,129.57 after six months)

Should I lock in a CD rate now?

If you believe interest rates will stay elevated for the near future or need regular income, CD laddering may still make sense . If you're concerned about interest rates falling in the future and don't expect to need access to your funds, locking in today's high rates for the long-term may make more sense.

Are 6 month CDs worth it?

CDs tend to offer higher yields than traditional savings and money market accounts, especially in a low-interest rate environment. A 6-month CD may be a good option if you know that you won't need access to your funds for at least six to nine months.

What is the biggest negative of putting your money in a CD?

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

Is 6 month CD better than 1 year?

A 12-month CD will often come with a higher interest rate than a 6-month CD, though this isn't always a given. Right now, though, many banks are offering a better rate for a 12-month CD . So if your goal is to earn the maximum amount of interest, then tying your money up for a year may be the right choice.

How much will a $5000 CD make in a year?

How much interest would you make on a $5,000 CD? We estimate that a $5,000 CD deposit can make roughly $25 to $275 in interest after one year. In comparison, a $10,000 CD deposit makes around $50 to $550 in interest after a year, depending on the bank.

What is considered a good 6 month CD rate right now?

The national average return on a 6-month CD is currently 1.49%. Online banks, however, offer much higher returns — as high as 5.50% APY right now.

How to avoid tax on CD interest?

How to avoid taxes on CD interest. One way to postpone being taxed on CDs is to put them in a tax-deferred individual retirement account (IRA) or 401(k) . As long as money placed in a traditional IRA is below the annual contribution limit, interest you earn may be tax deductible.

How can I double $5000 dollars?

To turn $5,000 into more money, explore various investment avenues like the stock market, real estate or a high-yield savings account for lower-risk growth. Investing in a small business or startup could also provide significant returns if the business is successful.

How much does a $5000 CD make in a year?

Here's how much money you can expect to earn on a $5,000 CD from each institution after a year (CD rates are current as of November 6, 2023): Popular Direct at 5.67%: $283.50 (for a total of $5,283.50 after one year) LendingClub Bank at 5.65%: $282.50 (for a total of $5,282.50 after one year)

Is it a good time to buy CDs right now?

So, should you open a CD now or wait? It could very well be the time to buy , especially since the Fed has indicated it will likely stop raising rates and start cutting them in 2024.

Why you should put $5,000 in a 6-month CD now (2024)

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MoneyWatch: Managing Your Money

By Angelica Leicht

Edited By Matt Richardson

October 4, 2023 / 3:51 PM EDT / CBS News

Why you should put $5,000 in a 6-month CD now

There are a few reasons why it would benefit you to put $5,000 into a 6-month CD now, including:

6-month CDs are offering some of the highest interest rates

One of the primary reasons to invest in a 6-month CD now is the attractive interest rates they currently offer. Historically, short-term CDs have provided lower returns compared to their longer-term counterparts. However, the financial landscape has shifted, and 6-month CD rates are now bucking that trend.

For example, right now, it's possible to find a 6-month CD offering rates of 5.5% or higher, but 3-year CD rates are maxing out at about 4.65%. And the rates on 5-year CDs are also lower on average. This means that by opting to put $5,000 in a 6-month CD, you can grow your money faster in a short time frame without the commitment of a long-term investment.

The fixed rate offers predictable returns

With a 6-month CD, you know exactly what to expect in terms of returns on your $5,000. Unlike the stock market, where prices can fluctuate wildly, your CD will earn a fixed interest rate over its term. This predictability can be particularly appealing to investors who prefer a stable, guaranteed return on their investment without the anxiety of market volatility.

And, while other interest-bearing accounts, like high-yield savings accounts, currently offer comparable rates, they are also variable. So, if you put your money in this type of account and there's an overall drop in the rate environment, chances are that the interest rate you're earning on your $5,000 will, too.

But that won't happen with a CD; you'll continue to earn the same high rate throughout the entirety of the CD's term.

A 6-month CD offers liquidity and flexibility

Six-month CDs offer a balance between locking your money away for an extended period and keeping it readily accessible. While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.

The risks are low with this type of account

CDs are renowned for their safety and stability. When you invest in a CD, your principal is typically insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or a similar agency. This means your initial investment is protected even if the financial institution fails, and you'll earn the agreed-upon interest rate over the 6-month period, offering peace of mind and a low-risk investment.

It's a smart way to diversify your investments

Diversifying your investment portfolio is a fundamental strategy to reduce risk. By putting $5,000 into a 6-month CD, you can allocate a portion of your funds to a low-risk, interest-bearing asset. This complements riskier investments in stocks, real estate or other ventures, creating a balanced portfolio that can help mitigate potential losses in more volatile investments.

The bottom line

In today's financial climate, where uncertainty looms and market conditions can change rapidly, putting $5,000 in a 6-month CD is a smart move for many investors. The higher interest rates, liquidity, low risk, diversification benefits and predictable returns make it a compelling option. So, if you're looking for a secure and profitable way to grow your savings in the short term, consider taking advantage of the favorable 6-month CD rates available now.

Angelica Leicht

Angelica Leicht is senior editor for CBS' Moneywatch: Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.