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Withdrawing $10,000 from your savings account to deposit it elsewhere isn’t a move that should be taken lightly. It can take an extended period to build up those savings, so accessing those funds should be approached strategically and carefully, particularly in today’s cooling interest rate climate. With inflation dramatically lower than what it was two years ago, the federal funds rate has since been reduced multiple times. The next and final cut of 2024 is widely expected when the Federal Reserve meets again on December 17 and 18.
In this climate, then, savers should consider moving $10,000 into a certificate of deposit (CD) account. And they should strongly consider depositing it into a long-term CD, which matures in more than 12 months, specifically. Below, we’ll explain why.
See how much more interest you could earn on your money with a long-term CD here.
Why you should open a $10,000 long-term CD for 2025
A $10,000 deposit into a long-term CD is a significant financial commitment, thanks to the fixed nature of CD rates and the early withdrawal penalties savers will need to pay to gain access to their money prematurely. That said, it can still be an advantageous move heading into 2025 for all of the following reasons:
It can earn you thousands of dollars in interest
A 2-year CD comes with a 4.25% interest rate now while a 3-year CD has the same rate. That equates to $868.06 and $1,329.26, respectively, upon account maturity. If you deposit more money or look for a longer term or higher rate, you’ll earn even more. Compare that to the unpredictable returns you may be relying on tied to other savings accounts and investments and the benefits of a $10,000 long-term CD become even clearer. That noted, if you’re looking for the highest rates and best terms, it may require the use of an online bank to obtain both.
Get started with a top CD account online now.
It won’t become less valuable as interest rates are reduced
Interest rate reductions can be a big boost for borrowers while causing a major headache for savers. With rates on traditional savings accounts and high-yield savings accounts variable, the returns savers earn on any money in these accounts are seemingly set to be reduced in the weeks and months ahead. The same can’t be said for long-term CDs. If you open one at one of the rates noted above — and rates are cut in 2025 — that $868.06 or $1,329.26 will remain the same. In an unpredictable economic climate, this security and predictability is a major feature.
It will protect you from market swings – and unnecessary spending
You can spend $10,000 in a much shorter period than it took to accumulate it. It can be beneficial, then, to protect that money both from inevitable market swings and adjustments to come in 2025 and beyond — as well as from your unnecessary spending habits. For many savers, if they have access to the money, they’ll use it. If they don’t, however, they’ll learn better ways to manage their existing funds. And a long-term CD, with hefty early withdrawal penalties that could wipe out all of the interest earned to date, is a good way to encourage these healthier spending habits.
The bottom line
A $10,000 long-term CD undoubtedly requires commitment from savers. But it can be well worth the reward. With a return that can surpass $1,300 upon account maturity, a built-in value that alternative accounts don’t have and protection against both market swings and the temptation to overspend, a $10,000 long-term CD offers multiple benefits for savers now. Just make sure that the amount deposited and the term chosen closely align with your long-term financial goals to avoid those early withdrawal penalties. For some savers, a different deposit or term length may be more advantageous.