If you are new to investing or haven’t had time to devote to researching your options beyond a basic checking or savings account at your local bank, then you may not have heard much about short-term, higher interest rate investment options, such as Certificates of Deposits (CDs). If you are someone who has a low tolerance for risky investments like stocks, CDs are a safe, secure option for you to earn a little money without the risk of losing any value on your money.
What is a CD?
A CD is an investment option that offers low risk and a relatively low return (given the low rate environment). CDs provide a slightly higher interest rate during an investment period over a checking or money market account. All gains earned from a CD are taxable as income. CDs are the safest investment given the fact that the interest rate is determined at account opening. An investor will receive the money they put into the account plus interest once the CD matures. Best of all, CDs are insured by the FDIC up to $250,000 and are not impacted by market fluctuations like longer term investments, such as IRAs, 401K plans, stocks, etc.
Why do people choose a CD over other types of investments?
CDs are safe and federally insured up to the maximum limit of $250,000 by the US government. They are also available in a variety of maturities and terms, thus making them more attractive to investors will a low appetite for risk. CDs offer a specific yield at an exact time, so the rate will remain the same during the term even if market rates fluctuate. Individuals also find CDs more appealing when saving for something in the near future, such as a home, car, wedding, start-up funds for a business, etc.
4 simple steps to opening a CD
- Perform a search to find the best bank CD rates available. Check out www.bestcashcow.com for CD rates offered by NH banks.
- Once you have found the best rate, you will need to determine which type of CD you want to invest in.
- Decide the term. Keep in mind the longer the term, the higher the interest rate you will earn.
- Open the CD with an amount you feel comfortable with investing.
Lastly, there are a few things to consider when choosing a CD that will affect your earnings. Pay particular attention to the annual interest rate (APY). A CD’s APY takes into account compounding interest and lets you know how much you will earn. Some CDs require a minimum deposit in order to open it. This can vary depending on the APY and term. Once you have opened a CD, you will not be able to withdraw from it until the term has ended. Should you need to access the funds, you will have to pay a penalty for taking the money out before it has matured.
CDs are an attractive investment option for anyone looking to make a little extra on their money. If you are not sure where to begin, the friendly team at Franklin Savings Bank is here to help. We think we offer the best bank CD rates around! You can check out our CD rates and specials by visiting our website at https://www.fsbnh.bank/rates/deposit-rates/. There are also calculators available to assist you with investing located at https://www.fsbnh.bank/resource-center/calculators/.