When people talk about the advantages of opening a certificate of deposit, they usually focus on the higher interest rate. While that is an important feature of CDs, there is one other advantage that often gets overlooked—a CD keeps your money safe. In fact, CDs are arguable some of the safest investments possible, and they protect your money in three key ways.
The first way a CD keeps your money safe is by ensuring you won’t lose it—even if a credit union fails. Almost every credit union is protected by the NCUA, an independent federal agency that is responsible for regulating and supervising federally-insured credit unions in the United States. Thanks to their share insurance, up to $250,000 of your money in protected per person, per institution, per ownership category.
Knowing that your CDs are guaranteed by the United States government might not seem like a big deal, but when you consider the risk that come with other investments, like stocks and private investment funds, there’s a certain peace of mind that comes with knowing you won’t wake up one morning to find your investment has been lost.
One of the benefits of keeping your money in a high-yield savings account like a money market account is the high interest rate you get. Unfortunately, that interest rate can change when the Fed adjusts their interest rates. This can make trying to predict how much money you’ll get from a savings account kind of frustrating.
When you open a CD, though, you lock in the interest rate. That means that no matter what the Fed does, your interest rate will stay the same for the entire term of the CD. This gives CDs a stability that other accounts don’t have, and it also makes them an ideal place to stash money you’re saving for a financial goal since you know how much you’ll have once the CD matures.
Finally, CDs keep your money safe from a source you might not expect—you. This doesn’t mean you can’t be trusted with money, but anyone who has ever saved for a financial goal knows the struggle of being tempted to spend the money you’ve saved on something else.
When you put your money in a CD, though, you have to keep it there until the CD matures. This means that, even if you are tempted to spend that money, you won’t be able to. You can even take this to the next level by using the CD bullet strategy and open multiple CDs when you’ve saved the minimum deposit requirement, all of which mature on the same day.
CDs don’t just give you a higher interest rate for your money, they also keep it safe. You don’t have to worry about the interest rate on a CD dropping, and thanks to the NCUA you can rest assured that up to $250,000 of the money in your account is safe. A CD can also keep your money safe from temptation, especially if you’re saving for a financial goal.
If you’d like to see how safe your money can be in a CD, become a member of First Alliance Credit Union today. A member advisor will be happy to help you with opening a CD account, and you can even save money for your CD in a checking account or traditional savings account!