Interest rates have fallen recently and are expected to fall further by the end of the year. Certificates of Deposit (CDs) are a way to protect your savings from falling rates. You can lock in an APY for a full CD term. Many of the best CDs listed here still offer competitive rates of 4% to 5%.

It’s tempting to put your emergency fund in a CD. These could be the biggest savings you have, so locking in a high rate seems like a good idea. But it’s actually a risky strategy that could end up causing you financial stress and costing you money.

Why you shouldn’t put your emergency fund in a CD

Your emergency fund must be accessible immediately. After all, you never know when you’ll need it. When you put money into a CD, you can’t withdraw it whenever you want. You should keep it there for the duration of the CD. For example, if you get a 2-year CD, then you can withdraw your money after two years.

That doesn’t work for emergency savings. Imagine that your car it broke and you need to fix it as soon as possible. You can’t exactly tell the mechanic that you’ll pay the bill in two years when your CD matures.

Our picks for the best high-yield savings accounts of 2024

American Express® High Yield Savings APY 4.00% Price information Annual percentage yield of 4.00% from November 3, 2024 Member FDIC.	APY 4.00% Price information Annual percentage yield of 4.00% from November 3, 2024	Min. to win $0
Capital One 360 ​​Performance Savings APY 4.00% Price information Check the Capital One website for the most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates may change at any time before or after account opening. Member FDIC.	APY 4.00% Price information Check the Capital One website for the most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates may change at any time before or after account opening.	Min. to win $0
CIT Platinum savings APY 4.70% APY on balances of $5,000 or more Price information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY Min. to win $100 to open account, $5,000 max APY Member FDIC.	APY 4.70% APY on balances of $5,000 or more Price information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY	Min. to win $100 to open account, $5,000 max APY

If you need to take money out of a CD before the due date, the bank will likely charge you an early withdrawal penalty. This is normally part of your earnings. from interest, and the exact amount depends on the bank and the length of the CD. A 1-year CD might have an early withdrawal penalty of three months of interest, a 2-year CD might charge six months of interest, and so on.

The whole reason to open a CD in the first place is for a stable, competitive rate. If you have to withdraw money early and lose a lot of the CD interest in the first place, it defeats the purpose of opening one.

Keep your emergency fund in a high-yield savings account

The best place for your emergency fund is a savings account. Specifically, a high yield savings account. This type of savings account pays interest well above the national average. In fact, some of these top savings accounts pay as much or more than CDs right now.

When your emergency fund is in a savings account, you can withdraw it at any time. With online accounts, you will be able to transfer your money into your account. check if you ever need them. Some savings accounts even include an ATM card in case you need cash fast.

If you are looking for an account for your fund. emergency, consider the UFB Portfolio savings account. It has a 4.57% APY, no account fees, and an ATM card with access to fee-free withdrawals from approximately 91,000 locations. Click here to learn more and open an account today.

CDs are good for savings that you’re sure you won’t need for a certain period of time. If you have money saved up for a down payment on a house but don’t plan to start shopping until 2026, you could put it in a 12- or 18-month CD. For your fund for emergencies and any other savings you might need without warning, a high-yield savings account is the better choice.