Money Markets vs. CDs
Q: As savings rates continue to rise, should I continue to use money market funds or switch to CDs?
A: Much of the news attention related to the Federal Reserve's rate hike campaign has focused on the hardships created for borrowers who now face significantly higher rates. But the silver lining of these repeated rate hikes has been that savers now have much more attractive yields to choose from. Several money market funds now offer 7-day yields of over 5.0%. CD yields have increased at an equally impressive pace, and good deals are readily available if you're willing to look beyond your local bank.
However, with most financial experts believing the rate hikes are nearing their conclusion, it's worth considering what path is best if rates level off, or even start to decline in the not-too-distant future. As usual, the answer is largely dictated by your intended purpose for the money. SMI always recommends keeping a cautionary amount of liquid savings available. Money market funds are typically the best choice for this money, due to their virtually instant liquidity. For money that you can reasonably expect to keep tied up for a year or more, current 1-year CD rates of 5.5% (or even higher for CDs with longer terms) may be a good choice (see our Current Best Rates tables 
). Just recognize that you may more than offset your higher rate with penalties if you lock into a CD and then have to take your money out before the CD expires.
Generally speaking, CD owners are probably wise to consider locking in the longest terms they feel comfortable with. With rates likely nearing their peak, extending your maturities this way seems like a good idea. Of course, the difficulty is always in predicting what interest rates may do next. Because this is never clear-cut, laddering is highly recommended for those serious about using CDs on a regular basis. 
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