The Best Savings Strategy in an Uncertain Economy Is a Boring One
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We've all had enough economic excitement this year. From tariffs and inflation to layoffs and recession fears, daily headlines are a nonstop barrage of bad news that threatens our financial security.
That's one of the reasons I'm all for opening a certificate of deposit right now.
CDs aren't as sexy as investments like cryptocurrency or timing the stock market. But that's what makes them perfect in today's precarious economy. Here's why you should consider opening a CD as part of your money strategy.
Read more: The Economy Sucks Right Now. Take Your Revenge With This New Money Trend
Stability in this economy? Yes, please
CDs have long been a go-to option for people who want a safe place to keep their cash. But they're especially valuable when the economy is as rough as it is right now.
Your annual percentage yield is fixed when you open a CD, so your earnings stay the same regardless of where interest rates go after that. That means you can predict precisely how much your CD will be worth when the time is up.
The Federal Reserve is expected to cut rates this year, so now's the time to lock in an APY up to 4.50%. It can help you maximize your returns and shield your money from stubborn inflation.
Plus, CDs are protected by federal deposit insurance if you open one at an FDIC-insured bank or NCUA-insured credit union. That means your money is safe (up to $250,000 per deposit, account category and institution) if the bank fails.
Don't overlook high-yield savings accounts
CDs are ideal for savings goals with a specific timeline, like buying a car or throwing a wedding. However, you must keep your money in a CD for the full term, or you'll face an early withdrawal penalty that will cut into your total earnings.
If you're building an emergency fund, you're better off opening a high-yield savings account. Your APY will be variable, which means it could change at any time, but you'll be able to take out cash whenever you need it, penalty-free. And many top high-yield savings account APYs are on par with today's best CD rates.
HYSAs also allow you to add money over time. Wth a CD, most banks require you to have all your funds in hand the moment you open an account.
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