4 Best Reasons to Open Your CDs in April 2024

Savers looking to earn higher returns on their cash have been looking for ideas on how to open certificates of deposit (CDs). With interest rates still high, some of the best CDs are paying over 5.00% APY as of April 2024.

But is opening CDs really the right strategy for you? While CDs may not be the best fit for every investor, there are some situations where opening a certificate of deposit is the perfect move for your money. Let’s take a look at some of the best reasons to open your CDs this month.

1. You need steady income with the safety of FDIC insurance

CDs are not exciting high-growth investments, and they shouldn’t be! CDs are safe and predictable. When you open a CD, you receive a guaranteed interest rate on your savings and are protected by FDIC insurance. Even if the stock market crashes or banks fail, your CD funds are still safe.

If you’re retired and need a steady income from the cash you’ve saved, opening a CD may be a good option.

2. You are saving for short-term goals.

CDs are not a good place to store your emergency fund. If you need cash this month, this week, or today, you should keep that money in a liquid, immediately accessible bank account.

However, if you have cash you don’t plan to spend anytime soon, CDs can be a good place to store it. Or, if you’re saving money for a short-term financial goal in the next two to three years, such as a wedding, a down payment on a house, or a dream vacation, CDs may be a good option that provides safety and security. Relatively high returns.

3. You believe the Federal Reserve will soon cut interest rates.

The Federal Reserve has been aggressively raising interest rates throughout 2022 to combat high inflation, and rates have remained high since then. As inflation has recently improved, the consensus among experts is that the Federal Reserve is likely to cut interest rates in 2024.

No one knows for sure if or when this will happen. But if you’re guessing what the Fed’s next move will be and timing the market correctly (let’s say you believe the Fed will cut interest rates in June 2024), now may be a good time to open a CD. If you open a CD now, you can lock in a higher APY than you could earn in the months after a potential future interest rate cut.

But keep in mind that the future is not guaranteed. What happens if the Federal Reserve doesn’t cut interest rates any time soon, or even raises them? The reason you open a CD isn’t because you “know” interest rates are about to fall, but because it fits your investment goals.

The biggest downside to CDs is that you have to keep the money for a certain period of time and are subject to early withdrawal penalties. If you withdraw money from a CD before its term expires, you may lose most or all of the interest you have earned.

But for some people, locking up their money can be a good thing. If you struggle to save money, if you like the feeling of knowing that your money is stored on a CD and you can’t get it out, if you need that extra incentive and nudge to keep you from being tempted to spend your money, then CD’s are for you. Early withdrawal penalties may be good for you. CDs aren’t immediately liquid cash like money in a savings account, but they do have some useful protections to help ensure your money earns interest.

conclusion

I won’t be opening a CD in 2024 because I want liquidity and flexibility to save cash. Most CDs don’t suit my goals. But if you want a safe, reliable return on your savings and don’t mind the risk of early withdrawal penalties, CDs may be right for you. And if you want to keep interest rates high before the Federal Reserve cuts them, you may want to open a certificate of deposit as soon as possible.

This savings account is FDIC insured and can earn 11 times the bank’s earnings.

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