CDs & IRAs

What is a certificate of deposit?

A certificate of deposit (CD) is a low-risk way to invest that’s commonly sold by banks and credit unions. While savings accounts have long been the traditional way to safely tuck away large sums of money, they offer some of the lowest returns on your money. 

On the other hand, Certificates of Deposits:

• Offer a higher, fixed rate of return.
• Are one of the safest investments available because they’re FDIC-insured.
• By putting your money in a CD investment, you can be reasonably certain that your balance will increase over time instead of decreasing if the market dips as would many other types of investments.
• There are a variety of CD rates to chose from, so pick the one that fits you.

Why consider a certificate of deposit?

Investing in a certificate of deposit might be a good option if:

• You won’t need the money until the CD investment matures.
• You’re trying to save up for a large purchase or for retirement.
• You have enough funds at your disposal that you won’t need to dip into the CD until it matures.

Also, by having an emergency fund stashed in a different type of account in case you need to access it, you can avoid withdrawing from your certificate of deposit and taking the penalty. However, if you might need access to the money you invest in the CD before its maturity date, it might be worth reconsidering.