Here’s How Much You Can Earn on CDs With $20,000 in Savings

If you’re holding on to cash you don’t need in your savings account, you could be missing out on a great long-term opportunity. With interest rates likely to fall later this year, now may be a good time to lock your money into a certificate of deposit (CD).

In exchange for giving up access to your cash, you’ll get a high interest rate — that cannot change — with virtually no risk involved. And although high-yield savings accounts (HYSAs) currently offer similar rates, those rates can change at any time, while a CD lets you lock in a high rate no matter what the market does.

Here’s how much you can earn from CDs with your loose cash.

How much can $20,000 earn?

As of today, the best CD rates are 4.00% or higher. Here’s how much you’d earn by putting your $20,000 into a top CD with the following rates and terms:

• 6-month CD: 4.00% APY = $396 in interest
• 1-year CD: 4.00% APY = $800 in interest
• 2-year CD: 3.80% APY = $1,549 in interest
• 3-year CD: 3.50% APY = $2,174 in interest
• 5-year CD: 3.50% APY = $3,754 in interest

These earnings assume you leave the money untouched and interest compounds annually.

Why choose a CD?

CDs are best for savers who don’t need immediate access to their money. Your rate is fixed for the full term, so you know exactly how much you’ll earn.

CDs are also low risk — they’re insured up to $250,000 per depositor by the FDIC, just like regular savings accounts.

The main trade-off, however, is liquidity. CDs are designed to hold your money for a set period, making them less flexible than traditional savings accounts. Withdrawing your money early could result in penalty charges that can eat into your earnings.

How to open a CD

Most online banks let you open a CD in just a few minutes.

Once you choose your term, you’ll just need to fund the account and let your money grow. Once the CD matures, you can withdraw the cash or promptly roll it into another CD.

If you want a mix of flexibility and earnings, consider building a CD ladder. That means splitting your savings into multiple CDs with different terms, like 6 months, 1 year, and 2 years. Once each CD matures, you can either cash out or reinvest at the current rate, meaning you’ll have a regular stream of passive income.

If you’re looking for a safe way to earn more on your savings, a CD is a great option. With rates around 4.00%, even a short-term CD can give your money a solid boost — and given that rates are expected to fall later this year, now’s the perfect time to lock in a high return.