When saving for important life events, you can put your money in CDs to keep it safe. CDs are ideal for keeping funds allocated for a specific life event in a safe place for some time.
CDs are safe investments that discourage spending by charging fees for early withdrawal. Different CDs are available based on your milestone events or a significant purchase you plan to make. Let’s explore the types of CDs you can choose depending on your goals.
How CDs Can Help You Grow Your Finances
CD choices can depend on life stages or financial changes such as retirement or a pay raise. Saving money in a regular account is easy to access. However, a CD is a safer option because it grows your money while it sits safely in your account. This allows you to withdraw to start an emergency fund or finance an expensive purchase after reaching full maturity.
Having an option that ensures you won’t touch your savings, knowing there will be penalties if you do, is essential.
Exploring Several CD Types for Major Life Events
Various CD types have beneficial capabilities that can help you save money during a specific term while earning interest. This increases the balance, which depends on an initial deposit amount. Each account includes a few similarities but many differences according to their functions, purposes, benefits, and limitations. Ensure your CD option fits your timeline so you can use the funds when needed.
Traditional (or Standard) CD
A traditional CD is a good investment to save money for later use once the CD matures. You can make a one-time deposit and receive a large return, which could provide financial support or income to spend occasionally.
While you can withdraw your money during the term, you could face an expensive penalty and an account closure. Therefore, if you have money you don’t need to spend immediately, a traditional CD is the best choice for the long term. You can further look into building a CD ladder.
High-Yield CD
As a low-risk investment account that offers profitable returns, a high-yield CD is best for saving funds. This account focuses on providing returns at higher interest rates for up to five years or more. Investors can earn top-tier APYs compared to the lower rates some banks offer. Often, the longer you store your funds, the larger the return you could receive at the end of the term.
Add-On CD
Investors can add money to their accounts using an add-on CD whenever they want. In a traditional CD, you must deposit all the funds simultaneously, which is different.
Investors can add small or large amounts of money to increase their balance and benefit from various account features and monetary advantages. Some of these advantages include liquidity risk protection and guaranteed returns.
Brokered CD
Brokered CDs allow investors to spread funds in a single brokerage account. Typically, a bank initiates the CD, and then a broker contributes a large investment sum. They then divide it into small portions and sell each share to investors on the secondary market.
Brokered CD terms extend up to 30 years and allow non-penalty withdrawals even before full maturity.
IRA CD
An IRA CD is the best investment account for saving for retirement. It can grow your savings and provide high profits with a fixed income.
One primary benefit of this CD is its stability, which guarantees investors high-interest earnings and non-penalty withdrawals by age 59 ½. This account provides a high-yield CD with tax benefits, so you have a predictable income. After your money grows, you can make more money by investing in rental property for regular income.
When picking the right CDs for milestone events, remember it can help you earn interest on savings or focus on financial growth. Consider your timeline and goals to maximize your earned interest without sacrificing funds. When ready, you can open a CD and view current interest rates at a financial institution like amerantbank.com.
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