Why I'm Putting My $25,000 in an HYSA Instead of a CD
KEY POINTS
- CDs have great rates right now, but HYSA rates aren't far behind.
- My goal isn't earning the highest interest rate, but having the flexibility to withdraw cash whenever I need it.
- 2025 is a strange year, so having a full emergency fund is extra important.
A friend of mine just bought a 12-month certificate of deposit (CD), bragging that he locked in a killer 4.65% interest rate. And while that's cool for him and his situation, I won't be putting any of my $25,000 cash pile into CDs anytime soon.
All my cash is parked in a high-yield savings account (HYSA) instead. And even though I could probably earn higher interest with a CD, I value flexibility right now. I want immediate access to my cash savings during this strange and uncertain year.
Right now I have about $25,000 sitting in cash, and here's what my plans are in 2025.
My main gripe with CDs right now
My biggest irk about CDs is having to lock in my money. Sure, CDs do pay a small premium over savings accounts for this reason. But why lock up my cash for a fixed term when the upside is so small?
Here's what I mean...
- Right now I'm getting a 4.50% return on my cash in my HYSA.
- A 12-month CD might offer me ~4.65% at today's rates, which is great. But that's only a difference of 0.15 of a percentage point.
- Over a full year, that translates to only a ~$40 increase in interest if I went with a CD.
Long story short, I am happily giving up the small potential boost of $40 to keep my money accessible all year. Flexibility means more to me than that tiny bit of interest.
My favorite HYSA right now
Right now, I'm a fan of the CIT Platinum Savings account.
If you've got at least $5,000 to deposit, you can unlock one of the highest interest rates that we've found.
What I really like about CIT is that there are no monthly fees and no account opening minimums. Junk fees are a pet peeve of mine!
CIT Bank is a division of First Citizens Bank, which is the 15th-largest bank in the U.S. It's FDIC insured, so you can sleep sound knowing your cash is safe.
So if you've got over $5,000 in cash savings and you're earning pennies in interest, do yourself a favor and open a CIT Platinum Savings account. It takes less than five minutes to set up.
Why I'm keeping over $25,000 in cash
There are two big reasons why I'm keeping a lot of money in savings -- and you may want to as well.
- Emergency fund: For my e-fund, I like to keep three to four months' worth of living expenses set aside. It protects me against job loss and bigger disasters. Right now, that's about $20,000 of my HYSA.
- Sinking funds: For my shorter-term savings goals, I also stash money in my HYSA. Later this year I'm planning a big family trip to Australia, which will likely cost around $10,000 to $15,000. So I'm slowly saving up for that.
Keeping all this cash in an HYSA means it's earning maximum interest, and I'm not at risk losing any of it investing in the market. To start earning potentially hundreds of dollars a year, move your cash to one of these top high-yield savings accounts available today.
Where I'm putting the rest of my money in 2025
I'm not blind to the fact that the market is yoyo-ing right now. 2025 is actually shaping up to be a great opportunity to invest while the market is down!
Not gonna lie -- I have half a mind to dump all my available cash in the stock market right now, knowing that if I wait long enough I'll make way more money than having it sit in a HYSA.
But again, flexibility means more to me than earning potential. I know better than to have zero emergency savings. A disaster could come out of nowhere and put me (and my family) in a tricky situation with no available cash.
So here's my plan for 2025: Any savings over and above my e-fund I plan to invest in my brokerage account for the long term.
Final thoughts
CDs are a great fit for some people. Right now they look like a safe bet because they can guarantee a solid return on your money during weird economic times.
But for me, the current interest rates on HYSAs make more sense. Locking up my money doesn't make sense because I may need immediate access to my cash at any time.
What's your take? Are you team CD or team HYSA right now?
Our Research Expert
Joel is a full-time writer at Motley Fool Money, known for his clear, approachable voice on topics like credit cards, savings hacks, and side hustles. He’s been writing about money since 2018 and previously managed editorial content for the How To Money podcast.
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