Prediction: CDs Will Still Be a Good Investment in 2025 -- but You May Want to Open One Now

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The CD rates savers are enjoying today are pretty impressive. You can get a 5% guaranteed return on your money in a CD without taking on any risk. That's an awesome deal.

But will CDs still be a good investment in 2025? Some people will tell you they won't be, but I disagree. If you ask me, the time to open your next CD is right now if you can swing it.

Don't wait to open a CD

The reason CD rates are as strong as they are is that the Federal Reserve's benchmark interest rate is sitting at a 23-year high. However, the Fed is expected to start cutting rates soon in response to cooling inflation.

Rate cuts can be great for borrowers since they make loans and credit cards less expensive. They're less ggreat for savers, because they lead to lower rates on banking products like CDs.

The Fed's next meeting is scheduled for mid-September. The consensus is that the central bank will announce its first rate cut of many then.

This doesn't mean CD rates will dive overnight, so don't panic. But are CD rates likely to fall gradually in line with the Fed's interest rate cuts? Yes, because that's how it typically plays out.

If you want the highest CD rate possible, consider opening one in August. Plenty of banks are still offering 5% CDs, but that rate may not be available for much longer.

Why 2025 will still be a good time to buy CDs

CD rates will probably be lower in 2025 than in 2024, but you don't need a 5% rate to make a CD a good place to put your money.

CDs are a great option when you have money you don't need for an emergency fund, but you also don't have enough time to invest. When you buy stocks, they can lose value, so you need several years to ride out potential market downturns. That's why investing over a period of less than five years is generally not a good idea.

For situations like that, where you're working toward a shorter-term goal, CDs can be a great fit. You get a guaranteed interest rate on your money so you know what to expect. And you'll generally get a higher rate compared to what a savings account will pay you.

We may see CD rates creep downward toward 4% in 2025. They might even fall into the 3% range. But remember, the value of CDs is that you can generally earn more interest there than a savings account. So if you need a safe place for your money, CDs are a good pick -- and they should remain a good pick into the new year.

Would I suggest buying CDs at 1%? Probably not. There's just not a lot of value there. But it would be shocking to see interest rates fall to that level next year.

If you're unable to open a CD this month, keep that option on your radar for the new year. And if you have a CD you opened this year that's maturing at some point in 2025, don't stress about getting stuck with a lousy rate. You may be pleasantly surprised at how much CDs continue to pay for quite a while.

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