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Why you should open a CD this June

By opening a CD this June, you could grow and protect your savings all summer long. Getty Images

When considering the right savings account, timing plays a key role. If you had opened a high-yield savings account or certificate of deposit (CD) account in the spring of 2020 or 2021, you would have seen a negligible return on your deposit. But as the economy evolved, inflation grew and the federal funds interest rate increased. That resulted in returns on both account types growing exponentially. Now, rates on both accounts hover near 5% or higher

That noted, inflation has cooled significantly since hitting a decades-high in June 2022. And if it continues to fall, a cut to the federal funds rate could become possible. While that would be good news for borrowers, it won't be as beneficial for savers. This underlines the importance of opening these accounts now and there are compelling reasons why you may want to open a CD heading into June. Below, we'll break down three of them.

See how much more you could be earning with a top CD account here now.

Why you should open a CD this June

In an evolving rate climate, knowing when to get involved and when to hold back is important. Understanding that, here are three reasons why you should consider opening a CD this June.

Rates are already high

It's not difficult to find a CD with a rate of 5% or higher right now, especially if you're willing to open an account with an online bank. That's equivalent to $5 earned for every $100 deposited, simply in exchange for moving some of your money into one of these accounts. To earn the full return, however, you'll need to be willing to keep your money in the account untouched until the full CD term has matured. But that may be a reasonable compromise for many, particularly when stacked against the minimal 0.45% average rate that comes with regular savings accounts now.

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Rates could rise again

The next inflation report is scheduled to be released on June 11 and the Federal Reserve is set to meet that day and on June 12, too. If the numbers in the former are still too high, don't be surprised to see the Fed raise rates the following day. But even if they just hint at a rate hike to come, that could be enough to raise the rates lenders offer on their CD accounts. After all, while the Fed doesn't directly dictate what lenders offer, they do influence the rates they offer customers. So be ready to act by then - or consider locking in a rate now before any announcement adversely affects what you otherwise could have secured.

It's a safe way to protect your money

Not only is a CD safe from any bank failures (it's FDIC-insured up to $250,000 per account, per lender) but it's also a way to protect against what otherwise may have been an endless cycle of withdrawals and deposits. And with inflation still stubborn and the costs of everyday living prohibitive, the chances of you accessing this money often are high. But with an early withdrawal penalty as an incentive to hold off, you may be able to save more money than if you had flexible access. That's a big plus this June and in most other months and seasons, too. 

The bottom line

If you missed out on the opportunity to earn substantial returns on CDs in recent years then be prepared to act ahead of June. Rates on these accounts are already high but could they could tick up even further based on a new inflation report and Federal Reserve meeting mid-month. And with effective ways to protect your money in today's inflationary climate scarce, it can behoove savers to act now while these accounts are still advantageous. 

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