3 Reasons I Will Never Put Money Into a CD


Here at The Ascent, we write a lot about different financial products. We explore high-yield savings accounts, credit cards, brokerage accounts, and yes, certificates of deposit. If I’ve learned nothing else from all of this exploration, it’s that I’m the last person on earth who should have a CD.

Here are three good reasons why.

1. I am an aspirational saver

Before we talk about me, let’s talk about my friend, who is the queen of certificates of deposit. She is perfect for them, she’s made for them in every single way imaginable. When she was thinking about buying one with her kid’s college money, just so it wouldn’t sit idle during his senior year in college, I could not have encouraged her more. This is not about me thinking CDs are not a good product.

But they are a terrible product if you’re an aspirational saver.

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What is an aspirational saver? It’s someone who tries very hard to save as much as they can, and then realizes that maybe they went a bit hard and need to withdraw some of that savings so they can live a somewhat normal life — before repeating the cycle over and over again.

CDs are the worst fit for aspirational savers. No matter how enthusiastic we are about saving, we will struggle to keep our CDs intact for the duration of the lock period, and in doing that, lose all the gain we’ve had.

2. My financial ducks are in no way in a row

I just went through a prolonged divorce, and there was a fair amount of debt involved. It happens, that’s life, but when you’re in this financial condition, the last thing you can handle is locking any portion of your money away. Even for a year. Because every so often, I get another call (my statute of limitations on collections is about up, thankfully) and that caller is looking for money from me because of something else that fell through the cracks during that difficult and financially destructive time.

If I risk tying up money in a CD, I’m going to be in trouble when that call comes. If, instead, I choose a high-yield savings account, I may ultimately earn a little bit less interest, but I’m going to have a lot more flexibility if collection agents come knocking.

Divorce is hard on your finances.

3. My income is in no way consistent

I’ve never not worked in either real estate or journalism, often both at the same time, so I have never really known a period of stable personal income. Some months are great, some months are terrifying, and it’s hard to plan for everything. This does not pair well with CDs, as you might imagine.

Because my income is not consistent, I may have to tap my savings from time to time, just to get through the month, and then scramble to put as much back as I can (I don’t always get it all returned, but I do what I can).

Because I’m a single-income household, have no family support, and have a chronic illness, when I have to fall back on myself, it’s a hard fall backwards. So, I can’t lock my little bit of security away in something I can’t touch for a year.

CDs are good for someone — just not me

Even once I make it out of the situation I’m in right now — and I will, I have a 42-point plan — I will never be the kind of investor who buys CDs. I will always be a little over-enthusiastic about how much I can comfortably save, I will always have remarkable medical expenses from a chronic illness that has sent me to bankruptcy once already, and I will always worry that I might have to pull money out of thin air.

I am not the person CDs are right for. CDs are for people who have steady incomes, stable expenses, and ideally for those that have more than one income (or another sturdy safety net like a pension) to rely on even when times get tough.

I want to be that person, that is my goal, but I think I’ll probably need to stick to high-yield savings accounts, mutual funds, and stock investing well into the future.

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