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There are multiple viable ways for savers to accumulate $50,000 in their savings accounts. But in today’s uncertain economic climate, there are few clear ways to protect and grow that money further. Stock market performance has been strong, for example, but market changes there are known to be abrupt and damaging. With inflation surging, wages softening and borrowing costs high thanks to elevated interest ratesthe incentive to protect this money is particularly strong now. Two effective ways to do just that are via certificate of deposit (CD) and money market accounts.
With a short-term CD, for example, savers can lock in a fixed rate on their money without having to give up extended accessibility, as the account will mature in 12 months or less. With a money market account, meanwhile, savers will be able to earn a similarly competitive rate without sacrificing access to their funds at all. They can even write checks from the account, streamlining their banking needs in a way that a CD will not structurally allow.
To better determine the value each represents for savers with $50,000 now, it helps to know the interest-earning potential associated with both. Below, we’ll do the math that savers need to know before getting started.
See how much interest you could be earning with a high-rate CD account here.
$50,000 short-term CD vs. $50,000 money market account: Here’s which will earn more interest now
The fixed rates that CDs come with will hold until the account hits its maturity date, which makes it easy to calculate the returns. Estimating the prospective returns on a money market account, however, will be exactly that – an estimate, as the account has a variable rate that will adapt to market conditions.
Still, with interest rates widely expected to hold steady now, savers can still secure an approximate idea of how much they’ll earn. Here’s how much interest they’ll earn with a $50,000 deposit into each, based on today’s available rates and terms and the assumptions that the variable rate will hold and that no fees are issued against either account type:
- $50,000 3-month CD at 3.90%: $480.53
- $50,000 money market account at 3.90% after three months: $480.53
- More profitable account: Both accounts will earn the same amount of interest
- $50,000 6-month CD at 4.10%: $1,014.70
- $50,000 money market account at 3.90% after six months: $965.67
- More profitable account: The CD will earn $49.03 more
- $50,000 9-month CD at 4.00%: $1,492.62
- $50,000 money market account at 3.90% after nine months: $1,455.58
- More profitable account: The CD will earn $37.04 more
- $50,000 1-year CD at 4.11%: $2,055.00
- $50,000 money market account at 3.90% after one year: $1,950.00
- More profitable account: The CD will earn $105.00 more
In three of these four scenarios, the CD is more profitable than a money market account with $50,000 as the baseline deposit. And that interest is guaranteed in a way that it won’t be with the money market account. At the same time, the CD won’t be able to evolve if interest rates were to rise in the way a money market account can.
Analyze both options carefully, then, before making a final decision. Consider the benefits of splitting the $50,000 into both accounts, too, which could allow you to earn a guaranteed high rate with the CD while also maintaining flexibility and accessibility with the other $25,000 in the money market account.
Compare your top savings account options here to learn more.
The bottom line
The choice between a $50,000 short-term CD and a $50,000 money market account is about more than just the interest-earning potential. While the CD is the clear more profitable choice currently, the difference between the two accounts is marginal. Savers should also consider the type of access they want and need to better decide on an account type. For many, the ideal approach may be to use both. Consider shopping around now, then, to find an account that works for you. Online marketplaces make it easier than ever to compare rates, terms and lenders all in one place.