Many investors are worried about the markets, and with inflation continuing at high levels, large sums of cash are being rethought. Some are taking the safer approach of high-yield savings and money market accounts and money CDs instead of putting their money into stocks. But which one would be earning the highest interest now? A side-by-side look at a $100,000 investment shows how well-matching results can be, and one type of account is always, almost always, on top.
Safety Over Risk
The economy remains uncertain, and many choose to preserve their principal, rather than seek high-risk stock market returns. CDs, high-yield savings, and money market accounts are all favored choices.
Offer the Highest Guaranteed Returns
Certificates of deposit (CDs) reaped the biggest interest income among the three types of accounts. Their fixed rates have guaranteed returns for the entire duration.
A 1-Year CD Could Earn Over $4,000
A $100,000 CD with a 1-year term at today’s highest rates would accrue about $4,100 in interest, a bit better than high-yield savings and money market accounts.
High-Yield Savings Accounts Remain Competitive
According to the Britannica Money, Money Market Accounts (MMAs) remain highly competitive, offering, respectively, high-interest returns (sometimes 4% APY or more) while providing, crucially, 24/7 access to cash without the early withdrawal penalties associated with CDs.
Money Market Accounts Lagged Slightly Behind
Based on the Remity report, Money Market Accounts (MMAs) generally offer lower, variable returns compared to the higher, fixed returns of Certificates of Deposit (CDs), yet they provide superior liquidity and stability for short-term cash needs.
Flexibility Is the Biggest Trade-Off With CDs
CDs are not as volatile as other investments, but they typically impose penalties for early withdrawals. That will require savers to have faith that they will not require the funds before they mature.
Variable Rates Could Change the Picture Later
Rates on high-yield savings and money market accounts may change from time to time, in contrast to rates on CDs. If the interest rates climb in the future, then those accounts may eventually be competitive.
Some Experts Suggest Splitting Large Deposits
Instead of going for just one, some savers split up big deposits between different types of accounts. This approach can help to strike a balance between guaranteed returns, flexibility, and improved access to emergency funds.
