These 3 Types of People Might Want to Open a CD in 2024. Are You One of Them?


The banking industry is seeing high demand for CDs in 2024. The top CDs are offering high APYs, and savings account APYs could be coming down soon if the Federal Reserve decides to cut interest rates this year.

However, CDs are not the best choice for everyone’s savings. Many people have misconceptions that CDs are always better than savings accounts, or that CDs are the “only” place to keep your money if you want to earn interest.

The truth is that CDs can be a great fit for some investors. Here are a few examples of people who should strongly consider opening a CD in 2024.

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1. Retirees who need income from their cash

Are you retired and living off of your retirement savings? If so, opening a CD in 2024 should probably be part of your financial plans. The top CDs in 2024 can give you a better yield on your cash than even the top high-yield savings accounts.

As a retiree, you’re no longer in the stage of life where you have to save money and invest for the future — you’re living in the future! You are “future you.” Congratulations! Since you don’t have to worry about saving that cash for other possible goals, your No. 1 priority is to maximize your yield. You don’t need the flexibility of a high-yield savings account, you just need maximum income. And that means investing in the top CDs could be the best option for your cash.

2. People who just received a windfall

Have you recently received an influx of one-time cash that you weren’t expecting and don’t need to spend right away? It doesn’t have to be life-changing money like winning the lottery, but any kind of one-time windfall deserves special handling. If you got a big tax refund, a bonus at work, a cash gift from relatives, an inheritance, proceeds from the sale of a home, a legal settlement, or any other one-time money, you might want to put that cash into a CD.

Here’s why opening a CD is a good choice for windfall money.

CDs are a one-time decision

Windfalls are “one-time” money, and most CDs require you to deposit money on a one-time basis. Unless it’s a special type of CD, you’re not allowed to deposit additional cash each month like you can with a savings account.

CDs pay a fixed rate

With a CD, you know you’re going to get a guaranteed rate of yield on your cash. That can be comforting if you’re trying to decide what to do with a larger-than-usual chunk of money.

CDs give you time to plan

CDs require you to commit your money for a set period, like six months or one year or longer. If you just received a windfall and aren’t sure how or when to spend it or invest it, socking away that money in a CD can give you some mental breathing room before you have to make any larger decisions. And your money can earn a good APY in the meantime.

I don’t want to open a CD in 2024 because I don’t want to lock up my money. But some people might see that level of commitment as a feature, not a bug. Sometimes locking up your money in a CD can be good for you.

This is one of the few reasons why a CD is better than a savings account: for some people, too much flexible access to your savings can be a bad thing. If you struggle to save, or need extra motivation to leave your savings untouched, a CD could be a better choice. Sometimes we all need incentives, guardrails, and nudges to improve our financial decisions; CDs “force” you, in a good way, to leave your savings in the bank and let your money grow.

Bottom line

I’m not the biggest fan of CDs. The top high-yield savings accounts are paying APYs that are almost as good as the top CDs, without making you lock up your money. But for some people and investment situations, opening a CD could be your best choice.

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