Is a Certificate of Deposit the Right Choice for Your Money?

3 Signs Your Money Doesn't Belong in a CD

CDs can be a terrific savings tool. But read on for some signs that your money shouldn't go into one. Image source: Getty Images

1. You might need your money very soon

It's important to have money in the bank at all times in case unexpected expenses arise. If you have cash set aside for emergencies, then that money should not go into a CD. Rather, it should sit in a regular (preferably high-yield) savings account.

2. You're saving for a far-off goal

Although CD rates are high right now, today's rates aren't the norm. And even if they were the norm, they still pale in comparison to the stock market's historical returns. As such, if you're saving for a far-off goal, like retirement or your kids' college, you should invest your money in stocks rather than limit yourself to the lower return you'll get with CDs.

3. You haven't read the disclosures

Any time you enter into any sort of financial agreement, it's important to know what you're signing up for. The same holds true for CDs. So you shouldn't put your money into a CD without reading the disclosures -- information your bank is required to provide regarding your CD's terms and rules.

Opening a CD could be a great way to snag a higher return on your money. But if these signs apply to you, then putting money into a CD may not be your best move.