Socking away money for something special next year? You could consider this approach.
Rates on one-year CDs have risen sharply in the past year, hewing closely to the federal-funds rate, the benchmark interest rate controlled by the Federal Reserve. The Fed has been steadily hiking interest rates in its effort to fight inflation. As a result, the fed-fund rate now stands at between 5.25% and 5.5%, up from close to zero in early 2022.
. Since one-year CDs are very popular, you can buy one at big national banks , your local hometown bank, credit unions and online banks.With one-year CD rates about as high as experts expect them to get, this is a good time to buy if you have money on the sidelines. There also are some specific scenarios where one-year CDs can be a good solution.
For instance, you could start out with three, six and nine-month maturities, add a one-year CD, and then roll over each balance from the shorter-term CDs into one-year CDs as they come due, ensuring that you would always have a portion of your cash available within a three-month window. If you find that your financial needs have changed by the time a CD term is up, you can just cash it out.
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