8 hours ago
How much will a $20,000 short-term CD earn if opened now?
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Savers could earn hundreds of dollars with a $20,000 short-term CD account if opened now.
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A certificate of deposit (CD) account is a commitment. To earn interest on your money you'll need to commit to keeping the funds untouched in the account for the full CD term (or length). If you withdraw the money before the account has matured, you'll have to pay an early withdrawal penalty, potentially negating all or most of the interest earned on the account to date. Even with CD interest rates still comfortably above 4% now, some savers may be less inclined to earn that money if it requires sacrificing the access they've been accustomed to.
With a short-term CD, however, that becomes less of a concern as it's easier to leave your money alone if you know you're going to regain access relatively quickly. And with short-term CDs ranging from three months to 12, that's exactly what savers will experience. This is especially advantageous for larger deposit amounts, as it won't involve giving up a lot of money for an extended period. And, right now, rates are generally higher on short-term CDs than long-term ones, a direct reversal from historic trends.
Before opening an account, however, it helps to know what one could stand to earn with a large deposit amount like $20,000. So, how much will a $20,000 short-term CD earn if opened this June? Below, we'll do the math.
Start earning more interest on your money with a high-rate CD here.
How much will a $20,000 short-term CD earn if opened now?
Savers will need a series of figures to precisely determine what they can earn with a $20,000 short-term CD that's opened now. But thanks to the fixed rate that CDs come with, this is easy to calculate, as they'll just need the initial deposit amount figure (in this case, $20,000), the rates available and the length of the term. Here, then, is what a $20,000 short-term could earn if opened now, calculated against available interest rates on the assumption that no fees or penalties are applied:
3-month CD at 4.40%: $216.46 for a total of $20,216.46 after three months
$216.46 for a total of $20,216.46 after three months 6-month CD at 4.49%: $444.07 for a total of $20,444.07 after six months
$444.07 for a total of $20,444.07 after six months 9-month CD at 4.31%: $643.08 for a total of $20,643.08 after nine months
$643.08 for a total of $20,643.08 after nine months 1-year CD at 4.40%: $880.00 for a total of $20,880.00 after one years
With hundreds of dollars to be earned by depositing this amount of money into a CD now, and market uncertainty making it difficult to otherwise predict the short-term future of your savings, it can be smart to open one of these short-term CD accounts now. Not only will you earn a sizable return on your money, but you'll also protect against any volatility to come in the weeks and months ahead, allowing your money to grow untouched by market conditions during the term.
Get started with a short-term CD online today.
What are my other savings account options?
If you don't want to give up access to your money, even if it's just for a few months, that's understandable. But savers should be well-informed about their other savings account options before making a final decision.
High-yield savings accounts, for example, are a popular alternative because they come with interest rates almost as high as CDs but with the same flexibility and access that traditional savings accounts have. The catch, however, is that rates here are variable and subject to change and potentially cool if the interest rate climate declines. So the rate you open the account with may not be the same one in a few weeks or months. The same caveat applies to money market accounts, too.
A CD, however, will keep its rate for the full term, even if the market changes. Traditional savings accounts, meanwhile, have rates under 0.50% now, according to the FDIC, making them a poor place to keep your money, especially with rates on both high-yield savings and CD accounts exponentially higher.
Learn more about yur high-yield savings account options here.
The bottom line
A $20,000 short-term CD could earn savers between $216 and $880 if opened this month and, potentially, even more if opened with an online bank. Since these banks don't have the maintenance costs that banks with physical locations do, they often pass on those savings to account holders in the form of higher rates. Be sure to shop around for rates and terms, then, before committing. Just don't wait too long either, as these rates are already on the decline and could fall further later this year.
