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Long-term financial protection can be ideal for savers, but in some cases, it may not actually be needed. Sometimes, savers just need protection for a few weeks or months. And, if they can earn a decent interest rate on their money, that can serve as an added incentive. Take today’s current economic landscape as an example. With inflation surging again, high interest rates remaining paused and borrowing costs subsequently elevated, short-term protection for your money takes precedence now … or at least until economic conditions begin to improve.
This is when a short-term certificate of deposit (CD) account can help. A 3-month CD, for example, will protect your money for approximately 90 days with a high, fixed interest rate that won’t change even if the interest rate climate does. This will allow you to budget properly, knowing exactly how much interest you’ll earn once the account has matured. And it will allow you to protect your principal deposit until you have a better understanding of where the economy is heading.
To better decide on the value of this unique savings account and term length, however, it helps to know the precise interest-earning potential. So, how much interest can a 3-month CD account earn if opened this May? Below, we’ll do the math.
Start earning more interest on your money with a CD account here.
How much interest can a 3-month CD account earn this May?
Calculating the interest-earning capacity of a CD account is simple to do thanks to that fixed rate. Here’s how much it can earn if opened this May, calculated with a variety of deposits and one of the top rates available with this term now (and assuming no early withdrawal penalties are issued):
- $1,000 3-month CD at 3.90%: $9.61 upon maturity
- $2,500 3-month CD at 3.90%: $24.03 upon maturity
- $5,000 3-month CD at 3.90%: $48.05 upon maturity
- $10,000 3-month CD at 3.90%: $96.11 upon maturity
- $15,000 3-month CD at 3.90%: $144.16 upon maturity
- $25,000 3-month CD at 3.90%: $240.26 upon maturity
- $50,000 3-month CD at 3.90%: $480.53 upon maturity
- $75,000 3-month CD at 3.90%: $720.79 upon maturity
- $100,000 3-month CD at 3.90%: $961.06 upon maturity
Savers can earn close to $10 with this account type, or close to $1,000 or more, depending on the deposit size. But this account shouldn’t just be valued for the interest it can provide, even though that may be robust based on the deposit. It should also be appreciated for the short-term protection it can provide for your funds, allowing you to weather this period of economic uncertainty with peace of mind and clarity.
Explore your top 3-month CD account options here.
Is a high-yield savings account the better option now?
A high-yield savings account can be found with a rate of around 4.03% now, making it marginally more profitable than the top 3-month CD accounts available. And it won’t require you to forego access to your funds the way you would be expected to with a CD. At the same time, it has a variable rate that will change, making interest-earning projections difficult to complete with precision.
You’ll also be able to make deposits and withdrawals as usual, which may not be advantageous if your banking habits need improving. Consider it a viable alternative, however, if your main goal is to earn a guaranteed rate while protecting your principal, the 3-month CD account may still be preferable.
The bottom line
A 3-month CD account won’t make you rich. But it will boost your bottom line and add a layer of financial security that many other alternatives simply cannot. And that’s all you may actually need now. In 90 days, you can revisit your strategy. For now, however, you’ll effectively weather today’s economic volatility, protect your funds and earn some sizable interest on top of it.