Is A CD Your Best Savings Option?

16 December 2022
 Categories: Finance & Money, Blog

If you want to save money, you can choose from several account and investment options. One of the best ways to save money is to get a certificate of deposit (CD), which is a type of savings account that you'll be able to withdraw from at a later date. Whether you want to save for your retirement or another major expense, a CD may help you achieve greater financial security. If you have questions about CDs, the following information may help you make a wiser decision as to whether this option is right for you.

If you deposit money into a CD, how long will the money be held before you can withdraw it?

When you choose to start a CD with a bank or another trustworthy financial institution, you'll be able to take out money once your CD reaches maturity. CDs are often held for as short of a term as a few months or as long as several years before the funds can be withdrawn, and you'll need to agree to the terms so that you and the financial institution will have some extra assurance and will know when exactly you can cash in on your CD.

Can you make money from a CD?

One of the main reasons why people put money into CDs instead of standard savings accounts is to make money off the interest. Interest will accumulate over time when a financial institution holds your money, and you'll be paid the full amount of your CD plus all accrued interest when you're ready to withdraw.  

What if you have to withdraw the money sooner?

If you need to take money out of your CD before it reaches maturity and the end of the term, you'll be charged an early withdrawal penalty. The penalty may require you to forfeit a certain amount of interest, which could zero out your accrued interest completely if you've only had your money saved in the CD for a few months before you withdraw.

Will you be charged service fees on a CD?

Each financial institution sets its own terms in regard to service fees, but you can often start a CD and hold the money in the account until it reaches maturity without having to pay startup or monthly service fees. However, if you hire a broker to assist you with starting a CD, you'll likely be charged a broker fee after you've opened the account.

How can you be sure that your money will be safe?

CDs come with additional assurances that make them less risky than other accounts or investment options. The Federal Deposit Insurance Corporation (FDIC) insures CDs so that the money always stays protected. CDs also don't rely on stock market trends as other investments do, so you won't have to worry about losing money from your CD if the stock market tanks. 

Whether you want to put money aside for the short or long term, a CD may be your most suitable choice. Talk to a financial expert to learn more about CDs and how starting one may help you reach your financial goals.

Contact a professional for more information about how to get a certificate of deposit