CDs and Money Markets – Safe Paths to Increased Savings

By Shelly Kavanagh | Published: February 2023

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.

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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.