If you’re looking for a secure way to keep your money growing, a CD, or certificate of deposit, might just be the perfect way to do it. Interest rates are soaring, causing people to look for different accounts to put their money in to keep up. These accounts are a great way to fight back against interest rates and inflation. However, there are a few stipulations to putting your $10,000 into one of them. This is all you need to know about certificates of deposits, how to invest in them, and the math broken down for you. 

What Exactly is a CD?

Before you invest in a certificate of deposit, it’s important to understand what it is. At its core, a certificate of deposit account is a place where you put your money that earns a fixed amount of interest. The catch is you must keep your money in this account for however long the agreed time is given the interest you’re receiving. If you try to take the money out early, you will be hit with fees or even lose all the interest. This way, you won’t be tempted to spend it or withdraw it early.  The key is to allow your money to be set aside and come back to it once the time has passed.

Another great thing about a CD is it’s Federally insured. Unlike other types of investments, your money is backed by the government. You won’t lose it if the bank you put it in fails, which has become a slightly more normal thing ever since crypto. If you’re looking for something you know will return a certain amount of money, a CD is perfect. But just how much do CDs return to you?

How Much Do CDs Return?

If you were to put $10,000 in a CD that’s fixed for one year, you’re going to get a return of 5.1% on average. This means after the year is up, you’ll have $10,510 without doing anything but letting your money sit still. Compared to the average savings account interest rate of 0.23%, you’re making a killing. It’s also important to note the average interest rate has gone up 5.1%, so you’re keeping up with the economy at this rate. CDs are a very common form of investment for those who don’t want to take on the risk of the stock market. How exactly do you invest in a CD, though?

Where Can You Invest in a CD?

You can apply to invest in a CD at almost any financial institution. You need to shop around and find the institution with the highest return rates, that way you’re making the most possible money. Once you find the institution with the highest rates, all you need to do is apply online or in person, whichever you’re more comfortable with. It’s also important to find the time frame that works best for you. Remember, you’re going to essentially say goodbye to this money for however long you agree to. The normal amount of time you will agree to is one year. 

What’s the Minimum You Can Invest in a CD?

If you’re reading this and want to invest in a CD but don’t have $10,000, you’re still in luck. While the exact minimum deposit varies based on whatever financial institution you pick, most offer plans for as little as $500. If you set aside just $500 for the year with no intention of touching it, you’d have $525.50 after the year is up. This number is based on the average 5.1% return you can expect from a CD. This might not seem like a huge win after one year. However, the results continue to stack up as time progresses. More often than not, investing takes time to build up. You’re not going to become a millionaire overnight with most investments. And once you’re comfortable seeing the extra money in your account, it’ll motivate you to continue investing in your future. 

 

Investing money is one of the ways you can ensure your future isn’t going to be reliant on someone else. At the end of the day, you get so much more peace of mind knowing you control your future. You don’t have to sit back and hope retirement checks continue to come. It’s also never too late to start investing money in a CD. Tons of people don’t know about these different investment tools until later in life. So get out there, figure out just how much you’re comfortable with setting aside, and make some extra money. 

 

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.