Is $10,000 Too Much to Put Into a CD?

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A lot of people are trying to take advantage of today's amazing CD rates before they start to fall. But you should know that some CDs offering great rates have a minimum balance requirement, and banks can set those minimums at their discretion.

In some cases, you might need $500 to open a CD. In other cases, you might need $5,000. Generally speaking, if you have $10,000 to deposit, you're in a good position to meet the minimum requirement across a wide range of banks.

That said, you may not be concerned with whether $10,000 is enough for a CD so much as whether it's too much to put into a CD. And the answer to that is, it depends on your needs and goals.

Make sure you're all set for emergencies

Any amount of money you put into a CD is too much if it takes away from your basic emergency fund. If you're not sure if you should put $10,000 into a CD, assess your monthly spending and emergency savings needs.

Typically, your emergency fund should be kept in a savings account . And it should have enough money to cover at least three months of essential expenses, like rent, food, and utility bills. If you're able to meet that requirement and still have $10,000 left over to put into a CD, then it's a fairly safe bet.

But let's say your essential monthly bills come to $3,000 and you have $15,000 in your savings account, $10,000 of which you're thinking about moving to a CD to lock in a great rate. In that case, you're leaving yourself with just $5,000 for emergencies when you should really have $9,000.

So in this example, yes, $10,000 is too much money to put into a CD. But if you have $20,000 in savings, moving $10,000 to a CD and keeping $10,000 on hand for emergencies is perfectly fine.

Remember, CDs generally slap you with an early withdrawal penalty for removing your money before their maturity date. That's why you can't count on your CD for emergency expenses, and you need to make sure you have enough money in regular savings for that purpose.

See if investing in stocks makes more sense

You may be looking to put $10,000 into a CD knowing full well that you're all set with emergency savings. But before you do that, think about whether a CD is the right home for your $10,000.

Indeed, some CDs are still paying 5% today, or close to it. That's a good return in its own right. But over the past 50 years, the stock market's average annual return has been 10%. And that 10% accounts for years when the market did great and years when it lost money.

If you're only looking to invest your money for a year or so, then stocks are not a safe bet. Generally, you want to keep your money invested in stocks for a decade or more so you have time to ride out market downturns. So if you're thinking shorter term, then a CD is a good bet.

But if you're looking to put $10,000 into a CD to save for retirement, and you're only 32 years old, then stocks are probably a smarter investment. In that case, you may want to put $0 into a CD and stick $10,000 into a brokerage account instead. If you leave that money in a stock portfolio for 35 years that delivers a 10% annual return during that time, you'll be looking at about $281,000.

A $10,000 CD deposit could make sense for you. But maybe not. Think about what you're investing the money for and what your timeline is. Make absolutely sure you're set with emergency savings before you put so much as a single dollar into a CD.

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