CDs – A Secure Way to Save Your Money

CDs – A Secure Way to Save Your Money

Banks offer a variety of products that involve different amounts of risk tolerance and reward. Many people are turning to CDs (Certificates of Deposit) as a safe way to invest their money while getting a good rate of return. But just how do CDs work and how secure are they?

How CDs Earn You Money for Both Short and Long Term Savings Goals

A Certificate of Deposit can be bought at any time and does not constitute opening an account, the way you would with a checking or savings account. Like a savings account, a CD earns interest, however it can earn substantially more because of the way it is built. With a CD, you agree not to withdraw your money during a certain period of time. As a result, the bank, such as Aurora Bank, rewards you by paying you compound interest on your deposit every day, and putting that interest toward your balance at the end of each month.

Getting Started with a CD

Banks want your business, which is why many of them are offering great CD rates that consistently beat the national average. Terms lengths can be as short as six months, to as long as five years with many different levels in between depending on the bank of choice. You can also buy multiple CDs with different deposit amounts and maturity rates to ensure that you have access to cash when you need it, while still getting the historically higher rates that CDs offer over traditional savings accounts.

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Secured by the Federal Government

Unlike some investment products, CDs are backed by the solidity of the federal government. For member Banks, the FDIC insures bank deposits for up to the maximum amount allowable per person, per bank – including CDs. Not all bank products are FDIC insured, making CDs a safe way to store your money while making it earn extra income for you. Whether your savings goals are short term, long term or both, a Certificate of Deposit is a great way to earn a nice return just by saving your money.

That’s because CDs work on the principle of compound interest. Interest is compounded daily and paid back to you every month. You can even choose to have your CD automatically rollover into a new set term at its maturity date. However, if you know what to look for, a CD can offer several advantages over a traditional savings account.