Home Budgeting Finance Why You Should Put Your Money in a CD

Why You Should Put Your Money in a CD

Have you been searching for various ways that you could save your money and watch it grow? Then you have likely come across the option of getting a certificate of deposit, also known simply as a CD. But what are the perks of putting your money into a CD, and what are some of the things that you should consider before doing so? Continue reading to get all the answers to these important questions.

Royalty-Free Photo

You Might Get a Better Interest Rate

Regular savings accounts at your local bank may not offer a very high-interest rate, so you might find that your money is not growing fast enough. When you opt to put your money into a CD, however, you might find that the interest rates that are offered are quite a bit higher. This means that you could reap the benefits of saving your money in the bank and you could get higher returns. Just keep in mind that different banks will offer different CD rates, so it is a wise idea to do some comparing of rates between banks before settling on the one that will get you the biggest return.

It Is a Safe Way to Invest

There are plenty of ways to invest your money today, but they are not all created equal, especially when it comes to the level of risk that is involved. Putting your money into the stock market, for example, might be too risky for your liking, so a CD would be a great alternative. Certificates of deposit are considered a safe way to invest your money, particularly when you are putting your money in a bank that is FDIC insured. As long as you do not have more than $250,000 in that bank, you will be covered even if the bank ends up failing in the future, so there is no risk of losing your hard-earned cash.

You Get a Guaranteed Interest Rate

When you look at your CD options, you will notice that some CDs offer higher interest rates than others, based upon how long you are willing to keep your money in the CD. So a 3-month CD might have a lower interest rate than, say, a 6-month or a 12-month CD. Oftentimes, the longer you are willing to keep your money locked in the CD, the higher the interest rate will be, but this is not always the case. No matter what you decide, though, that interest rate is guaranteed, so you could predict how much money you will get once the CD matures.

Consider That You Have to Keep Your Money Locked in

The biggest downside to a CD is the fact that you have to keep your money locked in it until it matures. If you decide that you want to take your money out earlier than the maturity date, or you need the money and you simply don’t have a choice, you will end up paying a penalty.

Once you weigh the pros and cons of putting your money into a CD, you’ll be able to decide if this is the right investment strategy for your money.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to content