When you discover the advantages of CDs, otherwise known as certificates of deposit, you might be tempted to open one immediately. They have higher interest rates than savings accounts, and they only get higher the longer the term of the CD gets. They’re also a safe investment, insured by the FDIC or NCUA, and they are very low-maintenance.

CDs aren’t perfect, though. The main disadvantage of CDs is that once you’ve opened one, you can’t withdraw your money until the CDs term is over, at least not without paying a penalty to do so. That can leave people wondering

When should you consider opening a CD account?

Unfortunately, there’s not a one-size-fits-all answer to this question. However, there are some guidelines that will help you determine if a certificate of deposit is the best investment for you.

Get a CD When you’re Saving for a Goal

As previously mentioned, many people don’t like the idea of not being able to access the money in a CD until it matures. If, however, you weren’t planning on using your money during that time anyway, you might not mind it being tied up. In other words, if you’re saving for a financial goal, you can put the money you’ve set aside in a CD and let it earn interest.

It’s worth pointing out that a financial goal isn’t the only reason you might have money set aside. You might have money you’re not using because:

• You’ve maxed out your emergency fund
• You’ve gotten a sizable windfall
• You have money left over from a financial goal you already reached

If you do, you might want to consider investing at least part of these funds in a CD.

Get started setting financial goals today! 

Get a CD When you Want a Safe Investment

Investing in stocks and mutual funds might pay off handsomely in the long run, but there is always an element of risk involved. If you’re not comfortable risking your money, a CD is a good alternative. When you open a CD, you know that your money is guaranteed to get that same interest rate until that CD matures.

Even better, every CD up to $250,000 is insured by the NCUA (for credit unions) and the FDIC (for banks). That means you’ll never have to worry about losing your money in a CD or any other United States bank account.

This predictability can also help with your financial planning. For instance, when you put your financial goal money in a CD, you can calculate how much money you’ll get back and use that information to see how much earlier you’ll be able to achieve your goal.

Get a CD When you Want to Avoid Temptation

One of the biggest obstacles to saving money is the never-ending stream of temptations. When you put money in a CD, though, you’re ensuring you won’t spend that money, at least not until the CD matures. This is a great way to help you build up your emergency fund, save for your financial goals and make sure you’re spending money on the things that are actually important to you.

Of course, you don’t have to limit the money you put in CDs to money you’ve saved. If you get a windfall and you’re not sure how to use it, for instance, why not put it in a CD to give yourself time to figure out what to do?

Got questions about CDs? Ask us! `

Open a CD at First Alliance Credit Union

A certificate of deposit is an excellent investing tool, but you have to know the best ways to manage the certificate of deposit pros and cons. . Since you can’t use the money in a CD until it matures, only use money that you know you won’t be spending, like the funds you’ve saved for a financial goal. You can also put funds in a CD to ensure you won’t spend them, and they’re always a safe investment if you don’t want to risk investing your funds in the stock market.

If you’d like to discover how a CD can help you reach your financial goals, become a member of First Alliance Credit Union today. You can open a CD that lasts anywhere from 6 months to 5 years, and you can keep track of what your CD is earning with our online banking platform or mobile app.