Smart Money: Crypto Crash, and Growing Money Fast

Smart Money: Crypto Crash, And Growing Money Fast
NerdWallet

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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with an explainer on the collapse of the FTX crypto exchange.

Then we pivot to this week’s money question from a listener’s text message:

“Hello! I’d love to get some information on what to do with $10,000 right now. What is a high-yield CD versus an IRA CD? What types of investments are out there that would gain the most in the next three to five years? This money is going to be used for house upgrades in three to five years, so I don’t want to sink it into something that will penalize me for taking it out. Thanks!”

Check out this episode on any of these platforms:

Our take on crypto crashes

When FTX declared bankruptcy on Nov. 11, it sent shockwaves throughout the cryptocurrency ecosystem that was already seeing lower prices across all major cryptocurrencies.

For those who held crypto in FTX, experts say that it may take years to recoup any money. Some may not be so fortunate, though, as cryptocurrency exchanges are not insured and cannot guarantee that money will be safe if the exchange fails.

The FTX crash and drop in prices of other cryptocurrencies serves as a powerful reminder that crypto is a risky investment. A diverse portfolio can protect you from potential losses.

Our take on growing money quickly

CDs, or certificates of deposit, can be good investments for those who want steady returns but expect to make a withdrawal in five years or less, such as for a home improvement project. CDs offer a fixed interest rate — usually much higher than that of a traditional savings account — for a fixed term. However, CDs often penalize you if you tap into the funds before the term expires.

A CD ladder can accelerate the rate at which your money grows, and it has the added benefit of giving you greater access to your money so you can avoid that early withdrawal penalty. In a CD ladder, you spread out your initial investment across multiple CDs with varying terms. Say you had $10,000 to invest. A CD ladder could look like this:

  • $2,000 in a one-year CD
  • $2,000 in a two-year CD
  • $2,000 in a three-year CD
  • $2,000 in a four-year CD
  • $2,000 in a five-year CD

Then at the end of each CDs term, you’d put your original $2,000 deposit plus any interest earned into another CD.

If you’re reluctant to tie up any money in a CD, consider a high-yield savings account. As the Federal Reserve has increased the federal funds rate, many banks and credit unions have raised their interest annual percentage yields. It’s possible to find high-yield savings accounts offering APYs of 3% and up.

Our tips

  • Know your investing timeline. In general, investing is not for money you think you’ll need within five years.
  • Think about return on investment. If you’re choosing home upgrades with an eye toward selling or return on investment, go for fixes that are less taste-based.
  • Weigh different funding options. Depending on the cost and urgency of your renovation, there are different options available for funding home improvements.

Have a money question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To hear previous episodes, go to the podcast homepage.

Neither the author nor editor held positions in the aforementioned investments at the time of publication.