52 Simple Ways to Manage Your Money – 24. Squirrel It Away – Certificates Of Deposit
What it Is…
An investment with a bank or savings and loan whereby you invest a specific amount of money for a specified time frame.
The return on your principal is guaranteed, and an interest rate is promised for that period.
Often called a “CD.”
How it helps…
Provides safety in the form of guarantees by the Federal Deposit Insurance Corporation (FDIC), or the Federal Savings and Loan Insurance Corporation (FSLIC).
Money is available before the end of the term, but generally with a six-month interest penalty.
Key items to look for…
Competitive interest rate of return.
How often the interest is compounded.
The solidity of the bank or savings institution.
Time …
One hour to investigate.
Keys to action…
Review your goals and objectives.
Determine amount to be invested.
Shop for yields.
SET IT UP
Determine the purpose of the use of this money. If appreciation or income are the main uses, consider another investment. For an emergency fund, this might be your choice.
STEP ON IT
Study the terms offered by various institutions in your area. These may change frequently.
STEP ON IT +
Start with a short-term basic account, with the option of adding more later. If you are not comfortable with the overall performance or conditions, you can withdraw at the end of the term and try again.
Notice…
Your reaction to using banks or savings and loans.
Your reaction to the guarantee.
Your comfort level with certificates of deposit.
But what if …
The yield doesn’t stay ahead of taxes and inflation?
Diversify by investing some of your money into other investments. (See other chapters on investments.)
Thought primers…
Investment safety to me means…
The good thing about having some of my money in the bank might be…
The bad thing about having some of my money in the bank might be…
At the thought of keeping all my money in one place…
My parents always said…
