As a financial writer, I put a lot of thought into money-related decisions. This relates to savings matters as well as less important things, like which store to buy my bread at for the best price.
This month, I’ve decided to open a few new CDs. What I intend to do is set up a CD ladder, rather than put all of the money I want to lock up into a single CD.
But there’s more than one reason I’m going big on CDs this June. My logic is as follows, and maybe some of these points apply to you, too.
1. Rates are still very strong
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All told, CD rates are still high because they’re tied to the federal funds rate, the benchmark interest rate the Federal Reserve is in charge of setting. As you might remember hearing in the news, the Fed raised interest rates numerous times in 2022 and 2023 to deal with soaring inflation. Since the economy has calmed down, the Fed is looking to cut rates pretty soon.
But that hasn’t happened yet. So I’m aiming to lock in a CD before rates start to fall. And you may want to do the same.
In fact, the Fed is next set to meet on June 11-12. We could see our first interest rate cut then, so if you have money available now, you may want to open your next CD before the Fed’s upcoming meeting.
2. Stocks are expensive
I believe in investing consistently, both during periods when stock values are up as well as when they’re down. But it’s kind of hard to psych myself up to buy stocks this month, given how expensive they are.
Right now, the S&P 500 is up almost 25% over the past year, and today’s value is just a hair below the index’s 52-week high. While it’s not a great idea to try to time the stock market, buying low and selling high is every investor’s dream. Right now, I’m looking at buying at a high, so I’d rather divert more money to CDs and see if the market cools off this summer.
3. I’m saving for a specific goal CDs are more suited for
Stocks are a great place to put your money when you’re investing for a goal that’s far off. But a lot of the money I’m trying to save this year is for my kids’ education. And since I’m only about five years from potentially having to pay college tuition for my oldest, I’m not comfortable investing college funds in the stock market. Five years isn’t a lot of time to ride out a downturn.
For this reason, I’m looking to ladder some CDs ranging from 12 months to 60 months. The longer-term CDs should mature before I need to take out the money for college expenses. And that way, I know I’m guaranteed a certain return without risking losses.
As you can see, I have my reasons for going all-in on CDs this month. But if any of these points resonate with you, you may want to do the same.
CDs could be a good bet for a goal you’re saving for that’s two, three, or four years out. They could also be a good place to park some cash for a bit of time while stock prices are up. So if you have spare cash, shop around for CD rates and consider opening one this month, before those rates start to drop.
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