Learning to grow your money takes a certain amount of base knowledge. Understanding your options when it comes to saving and investing will help you know where to put your money for the best growth.
What It Is
A CD stands for certificate of deposit. This product is offered by credit unions and banks to provide interest for an individual leaving a lump sum of money untouched for some time. Nearly every financial institute offers them. There are a variety of periods or maturity options and different penalties for early withdrawal. This lets you shop for the best CD rates and an ideal period for your needs.
Does It Make Sense for You?
A CD is unique compared to other investments because you get a fixed rate that is usually federally insured. The rates are typically quite a bit higher than standard savings accounts. The longer the maturity periods are, the better the interest rate you generally receive as well. CDs are typically for those who enjoy the safety of a savings account and do not need a fast rate of return. You won’t get to make additional deposits to the CD, unlike a money market account. CDs also will not allow you to withdraw a portion should an emergency arise.
Money market accounts allow you to not only make deposits but to withdraw a few times a year. CDs usually pay a higher interest rate than a savings account as well. One of the best things to consider before investing is if you want a fast return on your investment and if you will not need the principal for some time. If this is the case, a CD is suitable for you. If you don’t have any accessible savings or want a faster return, stock market purchases may be a better option.
