June is now in full swing. With summer just a few weeks away, the weather is becoming more inviting for many. However, June isn’t just a great time to enjoy the outdoors with your kids or take a pleasant walk in the woods. This is where Certificates of Deposit CDs can be valuable.
It’s also an excellent opportunity to think about your savings and the moves you can make to increase the money you’ve set aside, especially in the current context marked by persistent inflation and high interest rates. Leading products in this category offer impressive yields, many exceeding 5%. However, there’s a catch.
Smart CD moves to make this June
To access the yields a CD offers, you must be willing to lock your money away for the entire term of the deposit, which can range from a few months to several years, depending on the type of account you choose.
Of course, you can access your money if you need to, but doing so before the term ends can result in a penalty. Despite this, these accounts are valuable tools that, when used properly, can significantly impact your financial well-being. That’s why it’s important to know what smart CD moves you can make this June.
There are several strategies you can employ with a CD to boost the returns on your savings while planning your financial future.
If you don’t already have a CD, you’re missing out on the interest these accounts can provide. And, thanks to the Federal Reserve’s federal funds rate being frozen at a 23-year high, those interests can be impressive.
However, interest rates tend to move in upward and downward cycles. If the upward cycle we’ve experienced in recent years is coming to an end, you might not have much time left to secure the current high rates with a CD. So don’t hesitate, start looking for competitive rates now.
Get ready to act by Mid-Month
Interest rates on consumer accounts like CDs often depend on a benchmark rate known as the federal funds rate. This rate is controlled by the Federal Reserve, typically increasing when inflation is high and decreasing when inflation is low.
This is something important to keep in mind as we move through June, since the next inflation report is scheduled to be released on the morning of June 12, 2024, and the Federal Reserve will hold its Federal Open Market Committee (FOMC) meeting on June 11-12, 2024.
It’s important to note that inflation cooled in April, though not by much. If the report to be released on June 12, 2024, shows a slowdown in May’s inflation, the Fed could lower its federal funds rate. If that happens, consumer rates could also drop, which means the current high CD rates could disappear quickly.
Therefore, be ready to act before June 12, 2024, as waiting longer to open your CD could mean missing out on the chance to take advantage of the current high rates.
Use CDs as tools for Short-Term savings goals
After all, if you have to pay a penalty to access your money early, you’re less likely to do so, increasing the likelihood that you’ll reach your savings goals.
And that can be particularly important this June. After all, we’re about six months away from the holiday season. So, investing the money you’ve set aside for the holidays in a six-month CD now could help you earn a significant return on that money while ensuring it’s available when you need it later this year.
CDs are versatile financial tools with the potential to boost your savings returns. This June, there are some smart moves you should consider making with CDs.
In particular, start looking for one now and be prepared to act by mid-month. With the upcoming inflation report and the Fed meeting, there’s no telling how long the current high rates will be available.
Additionally, consider using a CD to help you reach your holiday savings goals and any other savings goals you might have.
Remember, the key to maximizing your returns with CDs is to stay informed and act strategically. By doing so, you can make the most of your savings and ensure that your money is working as hard as possible for you.
As the economic landscape continues to evolve, keeping an eye on interest rate trends and inflation reports can give you the edge you need to make timely and profitable financial decisions. Whether you’re a seasoned investor or just starting to build your savings, understanding and utilizing CDs effectively can be a crucial component of your financial strategy.
So, take the time this June to explore your options, stay informed about the latest economic developments, and make smart moves with CDs to secure a brighter financial future.
