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2023 was a tough year for borrowers thanks to nagging inflation and higher interest rates. And while optimism was high for 2024, the first inflation report of the year showed inflation rising in December. Now at 3.4%, it's still higher than the Federal Reserve's target goal of 2%, meaning that there's still work to be done.
That said, while higher rates have hurt borrowers, it's been a major boost for savers. While the average return on a regular savings account is just 0.47%, according to the FDIC, it's easy to earn many times that with a high-yield savings or certificate of deposit (CD) account right now. With APYson the latter account type as high as 6.50% (or even 7% for select savers), that adds up to significant returns in exchange for very little effort.
And, like any other interest-earning savings vehicle, the more you deposit the more you'll be poised to earn in returns. So how much could $25,000, for example, earn in a CD now? For some savers, the calculations could be worth making the move.
See how much you could be earning with a top-earning CD account here now.
How much could $25,000 earn in a CD now?
The amount you can earn by depositing $25,000 into a CD depends on two primary factors: The interest rate you can secure at the time of opening the account and the length of the CD term. Right now, interest rates are a bit higher for short-term CDs than long-term ones (a reversal from historical trends). You'll also stand to lose some or all of your interest if you withdraw your funds early thanks to penalties the lender will enforce.
That being said, here's what you can expect to earn with varying rates for a 1-year (short-term) CD:
- 7.00% APY: $1,750 for a total of $26,750 after 12 months
- 6.50% APY: $1,625 for a total of $26,125 after 12 months
- 5.75% APY: $1,437.50 for a total of $26,437.50 after 12 months
- 5.50% APY: $1,375.00 for a total of $26,375.00 after 12 months
Start earning more interest on your money with a CD today.
Is it worth depositing $25,000 into a CD now?
As is the case with most personal financial questions, the answer to this question is a personal one.
As the above calculations show, you could make more than $1,300 simply by transferring this amount of money into an account with one of these rates. That could be well worth it for many savers but, arguably, not enough for others. And, remember, you may have to pay taxes on the CD account interest earned.
But if those funds are sitting in one of those regular accounts with the paltry 0.47% rate, you're already losing money by not making the switch. Crunch the numbers and evaluate your financial goals and risk tolerance to determine if it's worth putting $25,000 into a CD now — or if you may be better served by investing it elsewhere.
The bottom line
CD returns were the highest they've been in quite some time last year, and they're unlikely to drop dramatically in 2024, especially now that inflation and the corresponding high rates to tame it are still in play. With the high APYs savers can get with a CD, it's worth acting now, whether you have a few thousand dollars to play with or even as much as $25,000. Plus, CDs are safe and insured up to $250,000 per account, per institution, making them a viable and attractive way to grow and protect your money in the upcoming year.
