A note of caution: Breaking into a CD early typically costs you a penalty that can be several months to a year of interest. If you aren’t sure when you’ll need the money, it may be best to skip CDs right now.
Both CDs and savings accounts offer protection
One of the biggest benefits of both types of account is federal deposit insurance up to $250,000 per customer at an insured bank or credit union. If a financial institution goes bankrupt, the government guarantees you’ll get your money back.
And rates will rise again
After the 2007-2008 financial crisis, CD and savings account rates dropped and remained low for years. Online banks and some credit unions were the first to step up to provide higher yields than traditional banks were offering. Their rates reached heights above 2% for savings accounts and 3% for long-term CDs. If history is any indication, recovery may be a long road, but it’ll come.
“If you freak out by watching rates, don’t watch them,” says Davis. “If watching rates gives you information to make sound decisions as part of your financial plan, then watch them.”
Whether or not you check rates, keep in mind: Rates play an important role in boosting savings, but they’re not the only way that savings accounts and CDs help you. If you have money socked away in an account, you’ll be ready to benefit once rates do rise again.