Forget CDs: Here's How to Grow $1,000 Into $10,000

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There's a reason a lot of people are opening CDs these days. CD rates are the highest they've been in years. And since you don't risk losing your deposit with a CD due to a market or bank meltdown as long as your financial institution is FDIC insured and you're limiting yourself to $250,000 or less, a CD might seem like the best ticket to growing your savings into a larger sum.

However, there's a far more efficient way to grow, say, $1,000 in savings into $10,000. And it's an option you should take advantage of sooner rather than later.

Don't let your money grow at a snail's pace

Today's 5% CD rates are far from the norm. In time, CD rates could fall to 3%, 2%, or less, and that wouldn't be shocking. But even if CD rates somehow hold steady at 5% for many decades, CDs are still not an effective way to grow wealth.

Case in point: Let's say you put $1,000 into a CD paying 5% interest. At that rate, it would take about 47.5 years for your $1,000 to grow to $10,000. That's a long time to wait. On the other hand, if you were to invest your money in stocks, you might get to $10,000 much sooner.

Over the past 50 years, the stock market's average annual return has been 10%. This accounts for periods when the market has done well and periods of slow or negative returns. If you put $1,000 into a stock portfolio with a 10% return, you can grow that money into $10,000 in 24.5 years.

That's still a pretty long time, but it's not nearly as long as 47.5 years.

Also, that 47.5 years assumes a 5% CD rate for the long haul. If we apply a 3% rate, which is far more realistic, you're looking at a whopping 78 years to turn $1,000 into $10,000.

Don't rely on CDs for long-term growth

It's certainly not a bad idea to use CDs to meet shorter-term savings goals. Let's say you have $1,000 in savings beyond what you need for emergency fund purposes, and you're hoping to take an awesome trip during the fall of 2025. In that case, it wouldn't be a bad idea to open a 12-month, $1,000 CD now at 5% and guarantee yourself an additional $50 by next August.

But generally speaking, CDs are not a great tool for growing long-term wealth, like retirement savings. So before you put money into a CD, think about your timeline.

If you're saving for a milestone that's less than five years away, stocks are a bit too risky, because that's not a lot of time to ride out a prolonged market slump. But if your goal is five years away or more, then you should generally aim to favor stocks, since they're a far more efficient wealth-building tool.

Or, to put it another way, if you limit yourself to CDs for long-term goals, you risk not meeting them in your lifetime. That would be a huge disappointment, to say the least.

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