How much interest can $40,000 earn over the next year? Here are 4 options to consider.

Where you keep (and don't keep) your money in today's economy should be carefully evaluated. PHIL LEO/PM Images/Getty Images

Where you keep your money (and where you avoid keeping it) is always important, but especially in the economic climate millions of Americans find themselves in right now. While inflation is far from the highs experienced in 2022 and 2023, it's still substantial and comfortably above the Federal Reserve's target goal. The central bank, meanwhile, after cutting interest rates (and thus reducing borrowing costs) both in 2024 and 2025, is now positioned to potentially raise rates later in 2026, perhaps as soon as this September. With unemployment concerns growing, wages softening and geopolitical tensions and overseas conflicts also contributing to a series of economic woes, it's critically important that you keep your money somewhere that's both secure and profitable right now, or at least for the next year or so.

This is especially important to get right when there's a large amount of money such as $40,000 to work with. Where you keep this money over the next year, specifically, could be the difference between growing it even further or, potentially, losing out on significant interest-earning opportunities and even mean losing some or all of the principal. So, how much interest can $40,000 earn over the next year? Below, we'll outline the expected returns with four different account types to consider right now.

Start by seeing how much interest you can earn with a high-yield savings account now.

How much interest can $40,000 earn over the next year?

There are four primary types of savings accounts you can put your $40,000 into right now. Here's how much interest each will earn over the next year, assuming the accounts with the variable rates don't change and that the principal is maintained for the full 12 months:

$40,000 traditional savings account at 0.38% after one year: $152.00$40,000 money market account at 4.00% after one year: $1,600.00$40,000 high-yield savings account at 4.10% after one year: $1,640.00$40,000 1-year CD account at 4.30%: $1,720.00

Savers shouldn't just look at the returns here, however, as each account type has unique features that are likely to become a factor as the year evolves. 

The certificate of deposit (CD) account, for example, while clearly the most profitable, will offer a fixed rate only in return for savers leaving their money untouched in the account. Withdraw your funds before the maturity date arrives on the calendar and you'll get hit with an early withdrawal penalty. 

The high-yield savings and money market accounts, meanwhile, have variable rates that will adapt to market conditions, though that's less of a concern now – when rates are expected to hold and potentially even rise – than it would be when the rate climate was cooling. Traditional savings accounts, however, with minimal interest-earning potential, should generally be avoided as you're essentially losing money by not utilizing one or more of the other accounts instead.

Get started with a high-rate savings account online here.

How much money can you make by investing $40,000 over the next year instead?

The average total stock market return is around 10% annually and has been as high as 16% over the past 10 years, according to J.P. Morgan. That equates to an annual return between $4,000 and $6,400 on a $40,000 investment. But that return is far from guaranteed and market downturns can result in a loss not just of interest but also of your principal. And that's something that none of the accounts outlined above risk, even the traditional savings account with its minimal rate. 

Consider investing carefully, then, and, if you want to avoid market risks and protect your money (at least through the next year at which point market conditions may have improved) consider the above account types as viable, albeit temporary, homes for your funds.

The bottom line

Interest earnings on $40,000 over the next year can be as low as $152 or as high as $1,720 or potentially even higher, depending on how variable rate accounts evolve over time. And while you can potentially make more by investing, the risks there may not be worth it for every saver. Evaluate all of your account and investment options carefully before getting started, but don't wait too long to act either. With interest rates still elevated and the need to earn more money particularly pronounced right now, it makes sense to make an informed decision sooner rather than later.

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