Knowledge Center

CDs and Money Markets – Safe Paths to Increased Savings

educating-myself | Read Time: 3 minutes

By Shelly Kavanagh | Published: February 2023

CDs and Money Markets – Safe Paths to Increased Savings

With inflation continuing to drive costs higher for everyday products and services, large purchases like vehicles and more, many people are looking for ways to save and keep a balanced budget in any way they can.

And while the resulting high interest rates are making unsecured debt—like credit cards with revolving balances—and other variable interest borrowing more expensive, there is a silver lining and opportunity to make more money on your savings funds than there has been for quite some time.

That’s because as interest rates rise, a couple of great savings tools are making a comeback—CDs and Money Markets.

Stash Your Cash with Fixed Returns
If you have built a savings nest egg and don’t need access to some or all of it for a period of time a CD, or Certificate of Deposit, can be a great option. The advantage of a CD is that because you are committing to keep a pre-determined amount of money in the account for a set amount of time, or term, you’ll get a rate of return that is guaranteed based on the amount and term you open the CD with.

A CD’s term can range from 3-6 months to five years or more, depending on what CD terms your bank offers and how long of a commitment you want to make.

CDs are covered by the FDIC when opened at an FDIC-insured bank, so your investment is risk free and you know exactly how much your CD will earn.

Keep in mind, however, that you will not have access to the funds in your CD during its investment term, so plan the allocation of your savings funds accordingly.

Access Your Cash with Higher Rates
If you are looking for higher interest rates than a traditional savings account but want the flexibility to access your cash for planned or unforeseen withdrawals, then a money market account is a great option.

Money market accounts earn interest over any period of time and because they are considered liquid, you can make deposits and withdrawals with no penalties for early withdrawals, which can be a factor in other investment accounts. Depending on your amount of savings in a money market account, a high yield money market account can reward you with even higher rates.

While you won’t likely get the rate of return on a money market account that you would on a CD, you have more flexibility to add money to the account, essentially building on your savings while also earning interest, and you can use it more fluidly for a rainy day or emergency fund.

While there is no one-size-fits-all approach to savings, having a nice mix of options to consider is always a good way to maximize your return, manage accessibility to your money, and to use a higher interest environment to your full advantage.




About the Author – Shelly Kavanagh
Shelly Kavanagh is Senior Vice President, Director of Retail Delivery for WSFS Bank. Prior to her current role, Kavanagh served WSFS as Director of Retail Strategy, Regional Manager, Retail Program Manager, and Small Business Relationship Manager. She brings more than 16 years of experience in banking.

 

 

Invest in a CD to Maximize Your Savings as Interest Rates Rise

Invest in a CD to Maximize Your Savings as Interest Rates Rise

As the Federal Reserve continues to raise its benchmark interest rate to fight inflation, many consumers are looking for ways to boost their savings for a variety of reasons. While some are simply looking for ways to save money on everyday expenses, others are considering what they should do with their current savings nest egg.

Read More
How to Stay on Budget in the New Year and Beyond

How to Stay on Budget in the New Year and Beyond

As the clock is winding down on 2022, now is an excellent time to reflect on the year that was and get your finances in order for the year ahead. This past year presented unique challenges for many consumers with inflation soaring and interest rates rising.

Read More
Spending, Saving and Inflation – Planning Your Finances in an Unsettled Economy

Spending, Saving and Inflation – Planning Your Finances in an Unsettled Economy

As the economy continues to be volatile, rising prices for just about everything has remained consistent, if not constant. And when it comes to spending and saving in this inflationary environment, Greater Philadelphia and Delaware region residents certainly have their concerns.

Read More
The Effects of Inflation, Rising Costs and Increasing Interest Rates Driving Regional Consumers to Re-Think Their Future Finances

The Effects of Inflation, Rising Costs and Increasing Interest Rates Driving Regional Consumers to Re-Think Their Future Finances

WSFS Bank’s annual Money Trends study found that nine in 10 people are worried about affording price increases in the next year, leading to expected changes in how they spend, save and even plan for significant life milestones.

Read More
Considerations When Opening and Using a Credit Card Amid Inflation and Rising Interest Rates

Considerations When Opening and Using a Credit Card Amid Inflation and Rising Interest Rates

If you are in the market for a credit card, but feel you need to know more about their benefits and how to choose one that best fits your needs, you are not alone.

Read More