Trying to figure out where to keep your money can be a daunting task. Your hard earned revenue deserves to be saved in the most beneficial way to you possible.
In this post we are going to analyze the two main ways of saving; CD’s (Certificates of Deposit), and Savings Accounts. Be sure to keep on reading so that you can earn the money that you deserve!
Certificates of Deposit
CD’s are timed deposits with the promise of leaving your cash in them until a certain amount of time has gone by. CD’s tend to have higher rates than savings accounts, and won’t be effected by decreasing interest rates.
Whether it be 6 months or 6 years, the depositor will be rewarded for not touching their money until the date that was agreed upon. Banks or credit unions will pay higher rates for higher maturity dates. Although you get better rates, your deposits cannot be touched. If you were to withdraw the money from CD’s you will incur a penalty/fee or potentially lose the interest that you have accumulated.
- When should I use CD’s?
- CD’s are best used when you know you have to make a payment in advance. For example, if you know you have to pay back a loan in 12 months, then you could set up a CD for that same amount of time.
- Not only will this keep your money secure, but the increased rate that you get from setting up a CD will give more money for the user to pay with. CD’s are also great for increasing money you may want to set aside and have no intention of spending in the near future
- How are the rates?
- As mentioned previously, CD’s almost always have higher rates than savings accounts. The longer the time deposited, the bigger the return. Additionally, you can always predict how much you will earn with a CD. The rate is set at the beginning of the deposit, and won’t change for the remainder of the time period.
- The ability to figure out exactly how much money you will have by the end of the deposit is a great way to time payments. This will also work in your favor if the interest rate drops. However, if the interest rate increases by a large amount, this feature can work against you.
- What if I need to make an early withdrawal?
- Don’t panic. If you need some emergency cash, you can usually take from your deposit, but this is a pretty bad idea and should be avoided if possible. Usually you will have to pay early withdrawal penalties, which can eat away at your earned interest and even into your initial deposit.
- It’s important to have enough money outside of CD’s to use on rainy days, so be careful with how much you put into your CD.
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Savings Accounts
Savings accounts are the most standard way to store your money. They’re simple to understand, and won’t break the bank if you need make to make any sudden withdrawals.
Savings accounts can change the interest rate on your account as time goes by, so it’s important to understand the effects the economy can have on interest rates, and when it’s a smart idea to deposit. On another note, saving accounts are easily accessible anytime you want.
- When should I use Savings Accounts?
- Savings accounts are simple to use, but can be hard to master. In general, it’s a smart idea to keep more money in your savings then it is to deposit using CD’s. This is because savings accounts are much more flexible and can be withdrawn from at any time.
- Savings accounts are the perfect place to store emergency funds for whenever you have a rainy financial day. They are also great to use when interest rates are expected to increase, as the interest on your account can changes over time.
- How are the rates?
- The rates for savings accounts work differently than CD’s. The amount of return you get back on your deposit will fluctuate constantly, meaning that savings accounts won’t be a great way to earn a consistent amount of money back.
- However this can work to your favor if interest rates are expected to increase in the near future. Unlikes CD’s, there is no minimum deposit that must be made for savings accounts, so you can start small and try your luck with this method of saving.
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Savings Accounts and CD’s
- Which method should I use?
- The answer is quite simple: both. By using both these methods, you can make your cash work for you, without you actually doing anything! CD’s are the best way to get more return on your money, but investing too much could leave you without enough money for emergency situations.
- That’s where savings accounts come in! Allocating your cash to have enough on standby in a savings accounts while also getting a big return through CD’s will be a hard technique to master, with some trial and error involved. Balance your cash wisely, you deserve to have your earnings maximized!
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Bottom Line
Trying to figure out where to keep your money can be a daunting task, but having the information over these 2 important methods of savings will hopefully make it a little easier on you. Both methods have their positives and negatives, it’s up to you to determine how you want to use them.
If you don’t have a CD or savings account, then be sure to sign up and start one today so that you can earn interest on your hard earned money! If you find these posts informative, be sure to check out more of the on HMB! Also check out our posts for the Best CD Rates and Best Bank Savings Rates!
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