Hate Thinking About Retirement? You’ll Like This Story

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A CD is essentially a savings account that gives you higher interest rates — except the money remains out of reach through a fixed term that can range from a few months to a few years. Most CDs have minimum starting investments — often $1,000 — but the more money you put into a CD, the higher investment rate you’ll probably score. And if you don’t need that money immediately, even better; the longer you can keep it tucked away in that CD, the higher APR you’ll get.

For now, however, you may want to hold off: “CDs suffer from the same problem as savings accounts and money market funds — the rates are so low that it’s hard to earn enough to outpace inflation,” Palmer explains. “It’s fine to have the money you want in the short-term — such as emergency savings, three to six months worth of expenses — in something safe, but you don’t want to have too much of your long-term savings there.”

Most CDs will be insured, so the risk should be low, but always read the fine print. If you dip into the CD too early, you’ll be penalized and lose a good chunk of your accrued interest.