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Can CDs be a good place for your emergency fund?

by Darci Swisher on April 21, 2014


If your emergency fund is sitting in a savings account that pays virtually nothing you might consider investing those dollars in a certificate of deposit.

CDs are just as safe and you’ll earn a little more interest.

The only caveat is that you’ll have to make sure you don’t get hit with stiff early withdrawal penalties should you need access to those funds before the maturity date.

And let’s face it, you never know when an emergency will pop up and you’ll be relieved you have six months or so worth of expenses socked away.

(How much do you need to have available? Take a look at our plan for setting your emergency fund amount.)

So what CD should you choose?

To make a CD worthwhile, you’ll need one that beats the top nationally available savings rate, which has been stuck at 1.01% APY for more than a year.

To achieve that return you’ll probably need to commit your money to at least a 2-year CD.

Search Bankrate’s regularly updated database of the best CD rates to see how much you can earn.
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