How Much Money Should I Keep In CDs?

Today’s high interest rates make certificates of deposit (CDs) more attractive for savers. Not too long ago, securing an interest rate of 5.00% APY was unheard of—but now, it’s possible.

In an attempt to get the most out of today’s high interest rates, you may be wondering how much money you can feasibly invest in CDs. The answer depends on several factors, like your financial goals, your overall financial situation and the specific CDs you open.

Read on to learn what you should consider when deciding how much money to keep in CDs.

How Much Should I Keep In CDs?

Like many financial questions, there’s no one right answer regarding how much you should keep in CDs. To figure out what makes sense for your situation, ask yourself the following:

  • Do you have plenty of emergency savings? If the answer is “no,” you may want to focus on that first. Generally, it makes sense to keep your emergency savings in a more accessible account—like a savings account—rather than a CD. That way, the money is there when you need it, and you won’t ever have to pay an early withdrawal penalty to access it.
  • What are your financial goals? Your financial goals and their timelines should be the driving factor behind your savings strategy. Short-term savings goals with a specific deadline, like a down payment or upcoming vacation, are good candidates for a CD. Long-term savings goals—like retirement—aren’t, because you’ll miss out on bigger returns you can find elsewhere.
  • How much money do you need or want to earn, and by when? With a specific goal, a deadline and your CD’s interest rate, you can reverse-engineer your CD strategy to figure out how big of a deposit—and how long of a term—you need to reach your goal.
  • Do you have plenty of liquid cash elsewhere? Ideally, you never have to make an early withdrawal from your CD, which can cost a pretty penny and eat into your earnings. Make sure you have enough accessible cash to cover any upcoming expenses before deciding to lock up money in a CD.
  • Do you have enough money to meet an account’s minimum deposit requirement? CDs often require a minimum deposit to open an account, so you’ll need to put at least that amount into your CD. If you don’t have much to invest, it’s possible to find a CD with no minimum requirement.
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How Much Money Can You Put in a CD?

There aren’t strict limits to how much you can put in a CD. While financial institutions may limit the amount of money you hold in certain accounts, there’s no hard-and-fast rule limiting your CD deposits.

However, federally insured banks and credit unions only insure up to $250,000 per depositor per account ownership category. If you put more than this amount in a single CD, some of your money will be at risk.

You can still safely invest more than $250,000 in CDs by opening accounts at multiple financial institutions. As long as your deposits at each bank or credit union are under $250,000 per account ownership category, the money in your CDs will be secure.

Remember, just because you can put a lot of money in CDs doesn’t mean you should keep all of your savings there. For instance, you may need to access your emergency fund before your CD term is up, which would require paying a penalty to access it.

What Is the Minimum Deposit for a CD?

Minimum deposits vary based on account and financial institution, but a required deposit of around $500 to $1,000 is typical when opening a CD. However, it is possible to find CDs with no minimum deposit requirement.

Jumbo CDs are like regular CDs but require much larger minimum deposits. Minimum deposits for jumbo CDs are usually around $100,000.

While you must meet the minimum deposit to open a CD account and earn interest, you can always exceed the minimum deposit. Remember that any deposits or interest earnings above $250,000 (per insured institution, per account ownership category) won’t be federally insured.

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How Many CDs Can You Have?

Theoretically, you can have as many CDs as you want. There isn’t a limit on the number of CDs you can open, though banks and credit unions may limit the maximum number of accounts you can hold. If this happens, you can always open a CD somewhere else.

Even though there aren’t widespread limits on the number of CDs you can have, that doesn’t mean it’s wise—or even feasible—to open lots of accounts.

Keep in mind you still have to meet account minimums in order to open a CD. For example, say you want to open five CDs as part of a CD ladder—a strategy that staggers CD maturity dates for frequent access to your funds. If each of those five CDs has a $1,000 minimum, you’d need at least $5,000 to open the accounts.

And don’t forget, the more CDs you have, the more accounts you need to keep track of. Keep this in mind every time you open a new CD.

Bottom Line

CDs can be a safe way to earn a little interest on your savings over a set period of time. But don’t put more money in CDs than you can afford to lose access to for the length of the CD’s term. Once your money is in a CD, you generally can’t touch it without penalty until it matures.

Consider your goals before deciding how much to put in CDs. CDs are a great option when you need to set aside money for shorter-term savings. Just make sure you have money saved elsewhere for long-term savings and emergencies.

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