For many people, saving becomes a sacrifice of several months. That effort is rewarded when you see a large amount that accurately reflects it. While $35,000 may be a trifle to some; For the vast majority it is an amount worth protecting and starting to generate new profits. Certificates of deposit (CDs) can be the safe place to grow that amount. How much can you receive? It depends on the deadline you put it in.

The Federal Reserve (Fed) decided this week to keep its interest rates in a range of 3.50% to 3.75%. This was announced after the meeting of the Federal Open Market Committee (FOMC), now under the leadership of Kevin Warsh as the body's new president.

“I am pleased to report that FOMC members are clear and unanimous: this committee will ensure price stability,” said Federal Reserve Chairman Warsh.

These decisions directly influence products such as certificates of deposit, known as CDs. Although CD rates are fixed once you sign up, the Fed's changes affect the new offers banks give.

How much would you earn if you invested $35,000 in a CD?

A certificate of deposit is an account where you leave your money “frozen” for a time in exchange for a fixed rate. The great advantage of this type of account is that you know from the beginning how much you are going to earn.

Based on current average rates, here's what you could earn on $35,000:

Simply put: the longer the term, the greater the profit; but also less access to your money.

Also, if you realize, the longer term does not always give you a better interest rate; Such is the case of the 18-month term, which offers a better return than if you leave your money in 24 months.

Advantages of CDs

The main advantage that a CD offers is security, since the funds within these accounts are protected by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per bank per person. This means that your money is insured, even if the bank has problems. For this reason, many see them as a stable option in times of economic uncertainty.

There is also another important advantage: the rate does not change. If you hire a CD today at 4.15%, that percentage is maintained until the end of the term, regardless of what the central bank does.

What you should take care of

Not everything is perfect with CDs; One of the main drawbacks of these accounts is the lack of liquidity. If you need to withdraw your money before the agreed time, you will almost always have to pay a penalty. In many cases, that can reduce much of the interest earned.

That's why CDs work best when you're sure you won't use that money anytime soon.

Is a CD better than money market account?

As a phrase says: “Everything depends on the lens through which you look.” Money market accounts currently offer rates close to 3.90%, on average. They are not so different in performance from CDs, but they are in flexibility.

In money market accounts you can withdraw money, use checks, and have more access to your funds. Additionally, their rates may rise if the Fed decides to raise interest rates in the future.

The downside is that they can also go down if the market changes.

So what is best? If you want security and a slightly higher rate of return, making the most of every percentage point, the CD is a good option. If what you need is for your money to keep growing while you have liquidity, perhaps a money market account is for you.

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