Saving is something that the majority of Americans are not very good at these days. A lot of people talk the talk but do not seem to be able to walk the walk. This is very understandable in many cases because temptation can be found everywhere in society. The temptations out there such as, “deals” and dollar menus everywhere coupled with the fact that money is easier to access than ever before make saving money hard for many. Previously people had to carry cash and checks around; consequently, today someone can check out for a small purchase by just swiping a flex keychain over a magnetic strip. People are even banking on their phones now. One way to combat this excessive spending is to purchase a certificate deposit, or CD.
Certificate deposits are financial products offered to people through basically all financial institutions, such as banks and credit unions. A CD is actually very similar to an everyday savings account at a bank. The money that is in the CD is federally insured up to $100,000 just like savings accounts and is essentially “risk free.” Risk free means that there is almost no chance that someone purchasing a certificate deposit will not be able to cash that CD back in to get his/her money.
The main difference between a savings account and a CD, and also where certificate deposits get their name, is in the fact that CD’s are “time deposits.” This means that when an individual buys a certificate deposit for, say, $100, they are giving that money to the bank for a specific period of time, generally 1-5 years, although there are longer and shorter CD’s in some cases. In return, the individual receives a “certificate” that says that when the time is up they are entitled to that money plus the interest that is earned. A further difference between a CD and a run of the mill savings account is that a CD earns significantly higher interest. This means that putting money away in a CD will give a consumer a better return on his/her investment than simply leaving it in a savings account. These higher interest rates are due to the fact that the bank knows for certain how long they can count on having the individual’s money, compared to a savings account where an individual may take out his/her own money whenever they like. This does not mean that in emergency situations an individual cannot get his or her money back early, however, usually there is a pretty significant fine for doing so.
If an individual is having trouble sticking to a savings plan they should consider purchasing a certificate deposit. This way they force themselves to let go of their savings, even when their favorite stores has a mega sale, and they earn more interest back than a typical savings account! Also, for the most part, certificate deposits are a safe place to keep money and make money at the same time.
Ashley Russell is a North Carolina native, hailing from Kings Mountain. She is a diehard Carolina fan who loves to watch her team play in any sport—a Tar Heel born and bred. She loves to read and write in her free time. Since high school, she has known she wanted to pursue a career that involved both reading and writing. However, she has recently discovered a love for computers, so she also hopes to incorporate them into her career. She spends her free time tutoring k-5 students in reading and writing in the Chapel Hill area. She is a second-year captain of a Relay for Life team and a participant in Dance Marathon 2011. She is also the online webmaster for the Blue & White magazine based out of Chapel Hill.
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