We all have a list of financial priorities, and most of us put saving money at the top—especially during a holiday season full of extra expenses. So how can you save more without sacrificing too much?
The recent rate increases are a positive thing when it comes to saving—your money can now earn more when deposited into a dividend-bearing account! Traditional savings accounts are a good option but there are other savings options that may work better—like certificates.
What is a certificate account?
These accounts go by many names—like certificates, time deposits, CDs and term deposits—but they all function in basically the same way. The good news? Certificate accounts typically yield a higher dividend rate than a regular savings account. It could be a great way to put money away for next year’s holiday shopping!
A certificate account is a fantastic choice to save money for future financial goals like buying a car, a home or even a dream vacation. Choose the term that works best for you (usually from six to 60 months), deposit your money and watch it grow. Keep in mind, in most cases, you won’t have access to this money until the term ends. If you need to withdraw the money before the term ends, you will likely be assessed a penalty fee.
What happens when the term comes to an end?
More money helps provide you with more opportunities. When the term ends, you can use the money for that special goal or can choose to reinvest it into another certificate—and keep watching it grow!
Another smart option? Use the savings from your certificate account to build further wealth. For example, use it to improve your home or yard to increase its value.
Are certificates safe?
If you tend to invest more conservatively, certificates are a great option. They are insured by NCUA or FDIC which means you assume less risk than with bonds, stocks or other unpredictable investments.
What is the best way to use certificates?
If you don’t have any immediate plans for your money, try a savings strategy called laddering. It involves dividing your money across several certificates, each with different maturity dates—12 months, 24 months, 36 months, 48 months and 60 months. This gives you the opportunity to access some of your money each year without penalties, while the rest continues to earn dividends.
To maximize this earnings strategy, reinvest the money from the maturing certificate into a new 60-month certificate.
Certificate accounts are safe and reliable—and with rising rates, you’ll earn even more!
