Certificates of deposit work as a short-term savings vehicle for goals such as upcoming home or car purchases. Safety is central to them: CDs offer predictable returns, federal deposit insurance, and no volatility in value such as in the stock market.
Preserving extra cash reserves, beyond savings for emergencies, in CDs can make sense, especially since their yields are traditionally higher than in other bank accounts. CDs play an important role as an emergency fund supplement in retirement.
Having a CD's fixed rate during a high-rate environment can mean steady, solid returns for years. One workaround to preserve some access is a CD ladder, where you divide your investment among various CDs with different maturity dates.
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