Overview
Savings accounts and certificates of deposit (CDs) are both safe, FDIC-insured ways to grow your money, but they trade off between access and return. Savings accounts keep your money liquid; CDs lock it away for a set term in exchange for a typically higher rate.
The Savings Calculator models flexible deposits and withdrawals over time. The CD Calculator shows your guaranteed return for a fixed term at a locked-in rate.
Key Differences
**Liquidity:** Savings accounts let you withdraw anytime. CDs charge an early withdrawal penalty, usually several months of interest.
**Interest rates:** CDs typically offer higher rates because you commit your money for a set period. Savings account rates can change at any time.
**Rate stability:** CD rates are locked in at purchase. Savings rates fluctuate with the market.
**Deposits:** You can add to a savings account anytime. Most CDs accept only the initial deposit.
**Best for:** Savings accounts work for emergency funds and short-term goals. CDs work for money you will not need for a specific period.
When to Use the Savings Calculator
- You are building an emergency fund and need instant access to your money - You make regular deposits and want to project your balance over time - You are saving for a goal but are not sure of the exact timeline - You want to compare different savings account APYs - You need flexibility to withdraw without penalties
When to Use the CD Calculator
- You have a lump sum you will not need for 6 months to 5 years - You want to lock in a guaranteed rate before rates drop - You are building a CD ladder to balance access with higher returns - You want to know exactly how much you will earn by a specific date - You are comparing CD terms (6-month, 1-year, 3-year, 5-year) to find the best value
Frequently Asked Questions
Q: Are CDs always better than savings accounts? A: Not always. When rates are rising, a high-yield savings account may outperform a CD you locked in at a lower rate.
Q: What happens if I withdraw a CD early? A: You pay an early withdrawal penalty, typically 3-6 months of interest. This can eat into or even exceed your earnings on short-term CDs.
Q: What is a CD ladder? A: A CD ladder splits your money across CDs with staggered maturity dates (e.g., 1-year, 2-year, 3-year), giving you periodic access while capturing higher long-term rates.
Q: Are both FDIC insured? A: Yes. Both savings accounts and CDs at FDIC-insured banks are covered up to $250,000 per depositor, per institution.
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