6 smart reasons to open a 10-year CD right now
While the current economy is not particularly welcoming to borrowers, it's a great climate for savers who want to maximize the returns on their money. After all, the Federal Reserve has increased its benchmark rate numerous times over the last 18 months to try and get a hold on inflation. And, while these rate hikes have resulted in borrowing rates that are exponentially higher than they were just a few years ago, they have also created an opportunity for banks and credit unions to offer big APYs to savers.
In other words, it may make sense to wait to borrow money if you can, as it's going to cost you a lot more than it would have in 2020 or 2021. But you shouldn't wait to take advantage of what the high-rate environment is offering to you in terms of deposit accounts — and certificates of deposit (CDs) in particular.
Right now, there is a wide range of CDs offering top-notch rates. And while shorter-term CDs come with some of the highest rates available today, don't overlook the benefits of longer-term CDs, like 10-year CDs. While this type of CD requires a longer commitment, opening one now can be a smart strategic move.
Find out more about today's top CD rates here.
6 smart reasons to open a 10-year CD right now
There are a few reasons why you may want to consider opening a 10-year CD today, including:
To lock in a favorable interest rate
As we've seen firsthand over the last few years, interest rates tend to fluctuate over time. And, while there's a chance that they could climb in the future, some experts believe that CD rates may have peaked — or are likely to soon. So, if you want to land the best rate on a CD, this could be the time to make your move.
If you open a 10-year CD now, you will lock in today's high fixed interest rates for the entire CD term. This can provide you with a stable and predictable return on your investment over the next decade.
Explore the CD rates you may qualify for here.
For stability in an uncertain market
Financial markets can be unpredictable, and the volatility can greatly impact various investment options, like stocks or mutual funds. A 10-year CD offers stability, though, shielding your investment from market fluctuations. This can be especially appealing for individuals who prioritize capital preservation and are looking for a secure way to grow their savings over the long term.
For savings discipline
A 10-year CD commitment naturally encourages financial discipline. Not only do most CDs have penalties for withdrawing your money early, which can eat into your interest earnings, but knowing that your funds are tied up for a significant period can deter impulsive spending and promote a more structured approach to saving.
That, in turn, serves as a financial planning tool, helping you stay focused on your long-term goals while resisting the temptation to dip into your savings prematurely.
To diversify your financial portfolio
While riskier investments may offer higher potential returns, a diversified portfolio often includes safer, more stable assets, like CDs. In turn, a 10-year CD can be a valuable addition to your portfolio, providing a low-risk, fixed-income component that complements more volatile investments. This diversification can enhance overall portfolio stability and reduce overall risk.
For long-term financial planning
Opening a 10-year CD aligns with a long-term financial planning perspective. Whether you're saving for a child's education, a home purchase or retirement, a decade-long CD can be a cornerstone of your financial strategy. And, the fixed term allows you to synchronize your savings goals with the timeline of your major life events.
For peace of mind
Financial peace of mind is priceless. A 10-year CD provides a sense of security, knowing that a portion of your savings is sheltered from the short-term ups and downs of the financial markets. This peace of mind can be particularly valuable during periods of economic uncertainty, allowing you to focus on your daily life without being overly concerned about the constant fluctuations in the financial world.
The bottom line
When it comes to your finances, strategic decisions can make a substantial difference in your financial well-being. Opening a 10-year CD right now can be a smart move for those seeking stability, long-term planning and a disciplined approach to savings. By locking in a favorable interest rate, diversifying your portfolio and fostering financial discipline, a 10-year CD can be a key element in securing a prosperous future.
