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Though rates on certificates of deposit (CDs) aren’t at the sky-high levels they were a year or two ago, these interest-bearing accounts are still offering pretty solid returns for savers. In fact, some short-term CDs are offering APYs of 5% or more currently.
For savers, that type of rate can be a pretty good incentive to stow cash away that they might not need to access for a while. But just how much should you put into a CD account if you open one right now? And what should you think about when trying to decide?
Here’s what experts recommend in terms of your deposit amount if you’re eyeing a CD account right now.
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How much money should you put into a CD this August? Experts weigh in
There’s no hard-and-fast answer in terms of the amount you should put into a CD, experts say. However, these guidelines can help you decide how much to deposit into a CD account right now.
Consider your financial situation.
The most important thing to consider when determining your CD deposit amount, experts say, is your financial situation. Do you already have an emergency fund? Do you have the money to weather the issues we’re facing with rising inflation and the higher prices that come with it? If not, you might want to be conservative in how much you put into a CD and leave other funds in a savings account — something more liquid.
“Be conscious of the state of the economy when deciding the amount you would lock into a CD,” says A’Jha Tucker, product manager of consumer deposits at Georgia’s Own Credit Union. “The effects of trade and tariff policies might directly affect their household and disposable income.”
You should also consider your needs for the money. Are you saving for a goal a few years down the line, or is there a chance you’ll need it sooner? Pulling cash out before maturity could result in early withdrawal penalties, which might delay your financial goal.
“You want to make sure you know how much money you can put into a CD without running the risk of pulling it out prematurely,” says Wheeler Pulliam, a certified financial planner and financial consultant at Xponify Financial. “CDs are the next best thing to putting your money under a mattress, except they at least earn interest, so think about CDs that way. Any mattress money you want to have, put in a CD, but if you think you will need liquidity, then CDs are not the answer.”
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Consider what you can earn against other options.
CDs aren’t the only place you put your cash, so it’s important to consider other options, too. How do rates compare on other low-risk investments, like high-yield savings accounts, annuities, money market accounts, Treasury bonds or gold?
“Right now, CD rates are slightly better than money markets and high-yield savings accounts, so you are being rewarded for locking up your money,” says David Jaeger, a certified financial planner at Canby Financial. “The question is, is it worth it to lock up your money for a slightly higher interest rate?”
If you can afford to take on a little bit of risk, you can also consider splitting your money into different investment options. You could put some cash in a CD and the remaining amount in something with higher potential yields, like stocks or a brokerage account. Just remember: There’s no guarantee you’ll get your money back on those higher-risk options, though, so be sure you’re not counting on it for a future goal or need.
Consider current and future interest rate trends.
Interest rates should also factor into how much you deposit in a CD account. If rates are expected to rise, you may only want to put a small amount in now or choose a short-term CD so you can put funds into a higher-earning one later on. If rates are going down, going all-in on a CD may be better.
“The Federal Reserve could begin to lower rates this year, and if they do, there will be a trickle-down effect on CD rates,” Jaeger says. “So, it could be important to lock in higher rates now before rates start to come down.”
CD rates are directly affected by the Federal Reserve’s moves, and according to the CME Group’s FedWatch tool, there’s an over 90% chance the bank reduces rates at its September meeting. If this happens, it would mean lower CD rates, too.
“Many factors affect rate trends, but it will boil down to economic growth and its impact on the fed funds rate, as CD rates tend to move in the same direction,” Tucker says. “My best guess is consumer spending will slow, mostly due to inflation, and we will see rates slowly decline.”
Think about a CD ladder.
You can also think about a CD ladder, which essentially means dividing your cash up among several CDs, each one with a different term. This ensures you have CDs maturing regularly, allowing you to decide then if you need cash or if you can afford to roll it over into a new CD and earn more interest.
“A best practice is to ladder your CDs,” Pulliam says. “I would be cautious about anything over two years, such as a 5-year CD, because rates are always changing and five years is a long time to have cash that you cannot access.”
Whatever you choose to put in a CD right now, make sure you do your research and that you’re confident in your decision.
“Putting a significant amount in CDs means you have confidence in how the market will perform, either positive or negative,” Pulliam says. “It means you are certain that whatever amount you put in a CD for however long fits your financial goal.”
The bottom line
Ultimately, deciding how much to put into a CD comes down to balancing your financial goals, liquidity needs and your comfort level with locking up your money. CDs can be a smart, low-risk way to earn interest, but they’re not a universal solution, and what works for one saver might not make sense for another.
By assessing your current situation, comparing other investment options, keeping an eye on interest rate trends and considering strategies like CD ladders, you can make a choice that aligns with both your short-term needs and long-term goals. With a little planning, your cash can work for you without compromising flexibility or future opportunities.
