Should You Save Money With a Certificate of Deposit?

There are numerous ways to save money, but there are several things that will determine which savings vehicle you will choose. Most people save and invest their money in several different ways. No one method is best for saving. How long you want to keep your money in the account, how accessible you want it to be, what you want for a return on investment and what your tolerance for risk are just a few of the things that will help determine what savings vehicle is best for you.

A certificate of deposit is an option for saving money. This vehicle locks your interest rate for a designated period of time. You will not be able to withdraw the money for this period of time, but the interest rate is higher than a traditional savings account. If you are not sure that you can keep your money in the CD for the fixed period of time required, you may want to opt for a money market account.

You do have options with CDs when it comes to managing the interest that the savings plan is accruing. You can have the interest deposited into one of your accounts periodically, usually monthly or quarterly. Some CDs have the option of being added back into the CD or paid at the end of the CD term. You must be aware that some CDs will rollover automatically and you must make arrangements to withdraw the money at the end of the term if that is your choice.

There are many savings vehicles and they all work for specific types of investing. CDs are a short to medium term investment. If you are looking for a long term investment with a better rate of return, you may want to consider a different type of investment.

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