How much interest will a $45,000 long-term CD account earn if opened this July?
Summary
A $45,000 deposit in a long-term certificate of deposit (CD) can earn much more interest than the same money in a regular savings account. Longer CD terms offer higher rates and compound interest, leading to significantly more earnings over time, but the money is locked in and not easily accessible.Key Facts
- Savings accounts currently earn an average interest rate of about 0.38% per year.
- Long-term CDs offer higher interest rates, around 4% or more per year.
- A 1-year CD at 4.11% would earn about $1,850 in interest on $45,000.
- A 10-year CD at 4.30% would earn about $23,558 in interest on the same $45,000.
- Longer CD terms earn more interest because of compounding, where interest grows on both the original money and previous interest.
- Savings accounts offer easy access to money, while CDs require locking up funds, often with penalties for early withdrawal.
- Over 10 years, a savings account would earn about $1,739 in interest, much less than a long-term CD.
- Choosing between a savings account and a CD depends on how soon the money will be needed.
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