Why you should put $20,000 into a long-term CD now (2024)

Certificates of deposit (CD) and high-yield savings accounts have always been smart and effective ways for savers to grow their money. But in recent months and years, they've become an integral way to do so.

That's because rates on both account types have climbed exponentially alongside the Federal Reserve's increases to the benchmark interest rate. As such, rates on both have grown from around 1% or less in 2020 and 2021 to around 5% right now. There's even a CD that some savers can secure with a 7% APY.

That said, the forecast for CD interest rates is unclear. It's unlikely, however, that they will increase much further this year and in 2024. They may even drop a bit. With that understanding, it makes sense to make a substantial deposit into a long-term CD now. By doing so you'll earn significant returns on your money over the next 12 months and for years to follow.

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Why you should put $20,000 into a long-term CD now

There are multiple advantages to depositing $20,000 into a long-term CD today. Here are three to know:

Potential for higher returns

Simply put: The more you deposit into a CD the more you'll make. While the rate you can get may be out of your control, the amount you deposit is up to you. So, by depositing $20,000, you can earn significantly more than you would have with $15,000 or $10,000.

How much more are you looking at? Using a 4.65% APY over 4 years, you will make almost $4,000, or just under $1,000 a year. So a $20,000 deposit will turn into $23,987.61, simply by moving your money from one account type to another. Compared to the 0.46% most savers are getting with their regular savings accounts, then, you're losing money by not making the switch.

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Interest rates are high (for now)

Interest rates on CD accounts are the highest they've been in years, but there's no telling where they'll be in a year from now. So it makes sense to lock in today's rates for as long as possible. A long-term CD (versus a short-term one with a term of less than 12 months) will allow you to do just that.

And you won't need to do so for four or five years, either. CD terms come in various ranges. Maybe a CD with a term of two or three years will be better for you. Ironically, the shorter your CD term, the higher the rate you can likely secure in today's volatile market. That's the complete opposite of how CD interest rates traditionally work. But even with long-term CDs hovering near 5%, you can't go wrong with either option.

Rates are locked

High-yield savings accounts are great, and there are many reasons why you should consider opening one today. But they simply don't come with the longevity and long-term benefits CDs do. That's because rates on the former account type are variable, and subject to change without notice. That can be a plus in a rate environment heading upward, but a drawback for when rates eventually come down.

Rates on CDs, however, are locked for the CD's full term — regardless of what happens in the larger rate environment. This is a major selling point for long-term CDs, since many experts don't expect today's CD rates to be around for much longer, let alone for years into the future.

The bottom line

No matter the CD length, now is a great time to open one of these accounts. That said, there are some compelling reasons to make a substantive deposit into a long-term CD now. By depositing $20,000, for example, into a long-term CD, you'll earn thousands of dollars of interest on your money. But those high rates won't last forever and are likely to even come down in the next year or so. Fortunately, CD rates are locked, so by opening a long-term account now, you can earn at that higher rate for many months and years to come.

Learn more about your CD account options here today!