Advertisement
UK markets close in 6 hours 1 minute

  • FTSE 100

    8,165.88
    +44.68 (+0.55%)
     

  • FTSE 250

    20,302.39
    +107.92 (+0.53%)
     

  • AIM

    769.06
    +4.69 (+0.61%)
     

  • GBP/EUR

    1.1800
    -0.0000 (-0.00%)
     

  • GBP/USD

    1.2697
    +0.0012 (+0.10%)
     

  • Bitcoin GBP

    47,682.25
    -1,629.55 (-3.30%)
     

  • CMC Crypto 200

    1,305.35
    -29.57 (-2.22%)
     

  • S&P 500

    5,509.01
    +33.92 (+0.62%)
     

  • DOW

    39,331.85
    +162.33 (+0.41%)
     

  • CRUDE OIL

    82.87
    +0.06 (+0.07%)
     

  • GOLD FUTURES

    2,353.20
    +19.80 (+0.85%)
     

  • NIKKEI 225

    40,580.76
    +506.07 (+1.26%)
     

  • HANG SENG

    17,978.57
    +209.43 (+1.18%)
     

  • DAX

    18,298.69
    +134.63 (+0.74%)
     

  • CAC 40

    7,617.75
    +79.46 (+1.05%)
     
Money:

What to do with an inheritance

For many, an inheritance represents a once in a lifetime opportunity

How Much Interest Could You Earn on a $250K High-Yield CD Over 10 Years? It’s More Than You Think

David Nadelle
·4-min read
jk78 / Getty Images/iStockphoto
jk78 / Getty Images/iStockphoto

Although consumer prices and inflation are still at a frustratingly high levels, the Federal Reserve has vowed to hold out on cutting its key rate until it sees a significant pressure drop in core inflation (the change in the costs of goods and services, excluding those from the food and energy sectors).

Check Out: Charlie Munger: Why 95% of Investors Have No Chance of Beating the S&P 500 Index

Read Next: 5 Unusual Ways To Make Extra Money (That Actually Work)

While elevated interest rates are impacting borrowers’ ability to pay their mortgages and loans, those willing to leave their money alone for a period of time can earn more than they normally would when interest rates are low.

ADVERTISEMENT

Now is a great time to invest in a certificate of deposit (CD). In exchange for storing your money longer with a financial institution, you’ll get competitive rates and flexible term options. For those is a position to save, buying a short- or long-term CD will provide guaranteed growth and complete protection against the variability of the markets.

CD rates have increased considerably alongside Fed rate hikes since 2022. According to Fortune, “1-year CD rates have increased more than twelve-fold, with 3-year and 5-year CDs up nearly six-fold and five-fold, respectively.”

Although the Fed is taking longer than expected to cut the benchmark rate, waiting until it does to buy a CD will hurt your chances at earning high interest. Right now, the best CD rates range from around 3.00% to 5.30% annual percentage yields (APYs), depending on term.

How Much Can I Earn Investing $250,000 in a 10-Year High-Yield CD?

Historically, longer-term CDs typically have higher interest rates than short-term CDs, because banks want you to keep your money with them for an extended period of time. However, the opposite is true right now.

CDs and savings accounts are influenced by the federal funds rate, so banks are offering higher rates on profitable short-term CDs and are tentative on extending the same high yield APY on long-term CDs because the federal funds rate could drop during a longer CD lifespan. Once the Fed starts cutting rates, banks will follow suit and CDs with a length of multiple years will have better APYs.

But long-term CDs make a lot of sense right now and many banks are offering ones with very competitive APYs. Locking in a 5-year or 10-year at a high APY will ensure that same fixed rate in five or 10 years, when banks might be paying far less.

For example, using Forbes’ CD Calculator, if you deposited $250,000 into a Discover Bank CD (which is offering a 10-year CD with an APY of 3.75% right now) and locked it in for a 10-year term, you will earn a total interest of $111,260.99 in 10 years time, making the CD’s value at the end of term $361,260.99. That’s more than tidy sum for a healthy starting deposit and some patience.

The Best CD Rates for June

Here is what Forbes has identified as the best yielding CDs for June, including short- and long-term CDs, jumbo certificates, promotional CDs and CD ladders.

Learn More: Here’s How Much a $1,000 Investment in Ford Stock 10 Years Ago Would Be Worth Today

More From GOBankingRates

This article originally appeared on GOBankingRates.com: How Much Interest Could You Earn on a $250K High-Yield CD Over 10 Years? It’s More Than You Think