3 Reasons You Should Invest in a CD Right Now

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If you're in the fortunate position to have extra money sitting around, there is an opportunity to put that money to work that you shouldn't pass up: certificates of deposit (CDs). While they may not be the most obvious or enticing investment option, the current environment is actually ideal for these products.

Here are three excellent reasons to invest in a CD right now.

1. Safety

CDs are always safe investments, but that doesn't mean you should ignore this key feature -- especially now. First, there is a guarantee that you'll get a certain return on your investment because you agree to a specific interest rate when you get the product.

But beyond that, you should also note that these accounts are FDIC insured for up to $250,000 per person. So as long as you keep your balance below that threshold, you don't have to worry about ever losing money with these investments. And in a time when the cost of living is especially high, it's vital to seek out opportunities for safety and stability as part of your financial strategy.

2. Current high rates

Right now, the best CDs on our curated list will give you an APY of up to 5.15% -- and those rates don't require you to keep that money locked away for years on end. Those rates can be found for CDs with terms of 18 months or less. Depending on the bank you go with, you may not even have to invest much to access these excellent rates, with several options offering a minimum deposit of $500 or even $0.

For example, if you put $1,000 into a 1-year CD that earns a 5.00% APY, you'd have $1,050 by the end of the year. Compare that to the average 0.45% rate offered by traditional savings accounts, and you'd be making about $45.50 more by simply choosing a different account type.

And again, because of the way that CDs work, you'd be locking in these high rates for as long as the CD term lasts. So even if rates dip overall during that time, you'd still be earning that high rate until it matures.

3. Option to ladder

If you're looking for a way to both capitalize on the high rate environment and make sure that you can access at least some of those funds in a relatively short period of time, you may want to consider a CD ladder. Here, you'd open several CDs at the same time, each with a different maturation date. So you'd get the option to reclaim some of those funds faster than others. For example, you could open CDs with terms of three months, six months, 12 months, and 18 months.

CD laddering can make CDs much more flexible, which can be useful in the event that you need to transfer some of those funds over to your checking account to cover an unexpected expense. And if not, you still have the option to reinvest those funds in another CD, further adding to your interest earnings.

CDs can play an important role in many people's financial lives. But given all of the current benefits, for those who can afford to invest in these products, there is good reason to consider adding CDs to your roster. Just be sure that you're getting the APY and terms that work for you by checking out and comparing offerings from different banks.

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