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Is a CD Better Than a Savings Account for Emergency Funds?

This is a tricky question—if you have trouble saving money, then yes, a certificate of deposit (CD) is better than a savings account. This is because you don't have immediate access to transfer money from your bank's app like you would with a regular savings account. We recommend having at least $500 in a regular savings account for those times that you need cash right away, and putting the rest in a high yield CD if you can. This way, you can earn a better rate on your savings and still have immediate access if you need it. Read on to find more benefits of saving with CDs.

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Can you have multiple CD accounts?

We're glad you asked! The answer is yes—and for those of us too tempted to spend from savings accounts, but worried about emergencies that might come up, the answer is easy. You can open multiple CDs at different terms and times of the year, so that you always have cash coming available should you need it.

If you don't end up needing that cash, you can simply roll over the CD into the same or different term. A term is how long you want to keep your money in a CD. WaFd Bank offers CD terms from 3 months up to 60 months. It may take a bit of saving before you're able to open multiple CDs (minimum deposit is usually between $500 and $1,000) but once you save enough to open the first one, you'll also benefit from compound interest while you're saving for a second CD.

Can you add money to a CD account?

In some cases, yes you can! Some banks will only let you make one deposit to your CD during the entire term, others not at all or only on specific terms. For most CDs, you cannot add funds until your CD matures and it's time to roll over to a new term or deposit to your other accounts.

How much money can you put into a CD account?

Typically you have to open a CD with $1,000, but always ask because not all banks have the same requirements. The most you can put in a CD is around $1,000,000 depending on which bank you choose.

How can a CD help you save?

CDs are designed around your investment staying put for a set amount of time. CDs also come with early withdrawal penalties (making a withdrawal before the maturity date), which means you're more likely to keep that money saved until your CD matures, or reaches the end of the term—ultimately earning you more money than you'd likely receive with a savings account. In a way, with a CD it's easier to save because you can't transfer cash easily, like you can from a savings account.

What if interest rates change during my CD's term?

A CD is beneficial not only because it's not immediately accessible, but also because it locks in your interest rate for a set amount of time. If rates go down, you can still enjoy a higher rate, especially compared to a regular savings account.

But what happens if rates go up? You can choose a shorter term so you can get the higher offered rates when that CD matures and it's time to roll over, or you can ask if the CD comes with a "bump". This means that at least one time per CD during the term, you can choose to contact the bank and ask to increase your CD's rate to the current one that's being offered. This is not something that is offered with every CD, so make sure to ask before you do anything.

Start saving today.

WaFd Bank offers great rates on CDs, savings accounts, and more—compare terms, check out our rates, or use our CD calculator to find out how much you can earn! To open an account, visit your local branch today.