How Much Should You Keep in a CD?

You don't want to risk putting too much of your cash into a certificate of deposit.

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A CD, or certificate of deposit, is a safe way to save money for short- to medium-term financial goals. CDs offer the tradeoff of higher interest rates and lower liquidity compared to traditional savings accounts. Most CDs come with a fixed interest rate and maturity date, usually between three months to five years from account opening. If you decide to withdraw money before then, you'll be hit with penalties -- making CDs more lucrative when you can afford to leave them untouched. 

If you deposit too much, you risk your profit by incurring penalties if you need your cash. If you deposit too little, you may not reach our savings goal -- or be able to open the CD in the first place.

What's the minimum deposit for a CD?

CDs require minimum deposits just like savings accounts, but they're usually higher. The minimum deposit to buy a CD varies by bank and CD type, but it typically ranges from $500 to $1,000. Some banks offer jumbo CDs with a minimum deposit of $95,000 or more.

How much should you put into a CD?

The size of your optimal CD deposit depends on the CD's term, the penalties for early withdrawal and how much you're saving for. But you'll also have to play defense by considering how much cash you should keep on hand for unexpected expenses.

How big of an emergency fund do you need?

Experts recommend having enough money saved to cover at least six months of expenses in case something comes up, such as a job loss. So if you spend $800 a month on expenses and save $10,000 a year, you should have at least $4,800 saved in liquid cash. How much of that you keep in a CD versus a high-yield savings account -- which offers better liquidity -- will depend on how quickly you might need to access that cash. 

How much do you need to save to reach your goals?

For any additional savings beyond your emergency fund, you should think about how much you need to save for a shorter- or longer-term goal. If it's for a shorter-term goal, such as a down payment on a home, a CD can be a great place to store your money safely while earning a competitive return. The stock market, on the other hand, would be too volatile for short-term savings goals. 

If you're saving for retirement or another long-term goal, you might want to opt for tax-protected savings and investment vehicles over CDs.

Pair your deposit and interest rate with your bank's early withdrawal policy to help you determine your deposit amount. For example, a penalty might be 90 days' worth of interest, or a flat minimum charge, like $25. If a potential withdrawal will cost you more money than the interest earns you, you may want to scale down your deposit.

How much will you earn in interest on a CD?

The amount you'll earn in interest on a CD depends on the length of the CD's term, the interest rate at the time of purchase and the specific bank or credit union. Compared to money market accounts and savings accounts, CDs typically offer the highest yield. But it's important to note interest rate on a CD is typically fixed, so if market interest rates rise, you won't earn any additional interest on your CD. The APY, or annual percentage yield, reflects the total amount of interest paid on the account over the course of a year. 

The bottom line

You'll need to at least keep the minimum deposit in a CD -- typically $500 or $1,000. But the more you keep, the more interest you'll earn. Withdrawing any of your money from a CD before its maturity date typically comes with penalties, and the length of time your money is tied up in a CD is determined by the CD's term. 

Correction, 7:30 a.m. PT Jan. 25: A previous version of this article stated that you purchase a CD for a fixed interest rate and maturity date. The article has been corrected to clarify that not all CDs have a fixed interest rate or maturity date. It also stated that the interest rate on a CD is fixed. The article has been corrected to clarify that the interest rate on a CD is typically fixed. It also stated that withdrawing money before the CD's maturity date comes with penalties. The article has been corrected to clarify that withdrawing money before your CD's maturity date typically comes with penalties.