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While extended protection for your money is ideal, sometimes it’s not realistic. Nor is it even needed. Sometimes, you just need to earn a little extra on your money while protecting your principal. While a certificate of deposit (CD) account has terms lasting 18 months or longer, for example, you may only need an account that matures in 12 months. With an account of this length, you’ll regain access to your funds relatively quickly, but you’ll also protect your money from today’s market uncertainty for a full year – and you’ll earn an elevated return in the interim.
To better understand the value a 1-year CD account offers savers now, it helps to start with the interest-earning potential. This is simple to calculate thanks to the account’s fixed interest rate that will hold through the maturity date as long as the saver keeps the funds untouched. So, how much interest can a 1-year CD account actually earn if opened this June? Below, we’ll crunch the numbers that savers should know before making their deposit.
See how much interest you could be earning on your money with a CD account here.
How much interest can a 1-year CD earn if opened this June?
Interest rates on CDs vary by lender and term, so savers who want to secure the most competitive rate will need to spend some time shopping around online first. Using one of the top 1-year CD rates of 4.11% now, here’s how much savers can earn with a variety of deposits by this time next June, assuming they don’t withdraw the funds prematurely:
- $1,000 1-year CD at 4.11%: $41.10 upon maturity
- $5,000 1-year CD at 4.11%: $205.50 upon maturity
- $10,000 1-year CD at 4.11%: $411.00 upon maturity
- $15,000 1-year CD at 4.11%: $616.50 upon maturity
- $25,000 1-year CD at 4.11%: $1,027.50 upon maturity
- $40,000 1-year CD at 4.11%: $1,644.00 upon maturity
- $50,000 1-year CD at 4.11%: $2,055.00 upon maturity
Depending on the deposit size, savers can earn around $40 with this account over the next year or more than $2,000. It’s important, then, to determine where you fit in this range, and while it may be tempting to deposit as much as possible right now, that could be a mistake. Early withdrawal penalties can easily negate all of the interest earned on the account to that point, so savers who want to take advantage of today’s high CD rates should start by determining how much they can comfortably afford to deposit for the full term.
Learn more about your current CD account options now.
The bottom line
A 1-year CD account could be the best option for savers who are looking for short-term protection for their money but still want to earn a competitive return in the interim. With interest earnings here ranging from $40 to hundreds and possibly thousands of dollars, savers should seriously consider their CD account options now. Understanding that the account will mature before next summer, savers can still pivot relatively quickly. Just be sure to get started with an amount that you can easily keep frozen for the next 12 months to avoid any penalties (and don’t forget about the tax implications for interest earned).