Are CD Investments Worth It?

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If you’ve saved up enough money and would like to safely store it until you need it, there are many factors to consider. Where should you keep your funds? When will you need access to them ? What’s the best option for your financial situation?

Luckily, certificates of deposit (CDs) offer a secure way to grow your funds over time. This type of account typically earns more interest than a regular savings account, making it a popular option.

If you’re wondering if CD investments are worth it, we put together some factors to consider.

Are Certificates of Deposit worth it?

A certificate of deposit is a low-risk time deposit that earns a fixed interest rate for a specified time period. In return, borrowers leave their money in the account until its maturity date. This type of account offers security, increased savings and flexibility in terms.

Certificates of deposit and savings accounts both focus on growing your savings, but they offer different advantages and disadvantages. To know if this type of investment is worth it requires an in-depth understanding of your current financial situation. Are you looking for fixed interest rates? Can you afford to set your funds aside until maturity? If so, this type of investment can certainly pay off over time.

Below are the pros and cons of CDs, in comparison to Savings accounts.

Advantages of a CD Account
Disadvantages of a CD Account
Above average interest rates
Early withdrawal penalty
Fixed interest rate during term
No accessibility until maturity
No penalties if held until maturity

Advantages of a Savings Account
Disadvantages of a Savings Account
Low or no account fees
Potentially lower interest rates
ATM access
Limited number of monthly withdrawals

Are CDs a good investment?

For those looking to minimize risk and grow their money over time, certificates of deposit are a great investment.

Borrowers can count on the following:

  • Maximized savings. When compared to savings accounts and money market accounts, some CDs offer a higher yield over time.
  • Long-term returns. CDs with long maturity rates will almost always have better interest rates—resulting in a higher return on investment. This is ideal for savers planning for their long-term goals.
  • No market fluctuations. Because you’re locked into a fixed interest rate over the course of the term, you don’t have to worry about the risk of the unknown. Investors know exactly how much the CD will be worth at the close of the term.

If you’re set on specific long-term goals, such as purchasing a home or planning for retirement, a CD investment is a great choice. Its maturity date ensures that your interest rate will not change, offering a higher investment by the end of the term.

Are CDs a safe investment?

Certificates of deposit are not only beneficial, but they’re also fairly safe. The Federal Deposit Insurance Corporation (FDIC) insures CDs up to the maximum account allow by law, meaning you can rest assured knowing they have minimized risk and peace of mind.

Although CDs guarantee a fixed return, there are certain challenges that you should be aware of before investing—such as early withdrawal penalties, minimum deposit requirements, and others.

Before opening an account, be sure to speak with your financial planner to make sure you’re following the right steps to meet your financial goals.

How do CDs fit into your financial plan?

While certificates of deposit can result in maximized savings, they’re not necessarily the single foundation for your financial future. Instead of putting all of your money in one basket, you should be open to a range of investment options. CDs focus on helping you meet long-term plans, while other interest-yielding accounts can help take care of ongoing needs.

How to Invest in CDs

There are several available options when it comes to investing your money. But as long as you’re aware of all of those options—and more importantly, investing wisely—you’ll be well on your way to financial freedom.

If you’re wondering if you should open a certificate of deposit, it first depends on your personal situation and long-term financial goals. But if you’ve decided that it’s the right option for you, here’s the good news: opening an account has never been easier. You can open an online CD in just minutes, by accessing from your computer, tablet or mobile device.

At PurePoint Financial, we pride ourselves on empowering our clients to earn more.Simply call our Client Support Center, or open an Online CD right from your computer, tablet or mobile device today.

This article was helpful.