Who doesn’t love predictability? I thrive on predictability; to the point that when anything does not go my way, according to my schedule and my timeline and my plan on any given day, I’m suddenly discombobulated and out-of-sorts. Fortunately, it does not happen all that often, and that is saying something for a wife and mother of four small kids. I like predictability. I like to wake up at 5 am every week day and take a shower, write certain articles, drink my coffee, do my hair and make-up, write for another half hour, get kids ready for school, go to school come home and follow my pattern and schedule for the rest of the day.
I like predictability. Without it, I am lost.
The same goes for my banking. I married a banker, so that helps. However, when it comes to savings, I’m a big fan of a CD. I’ll tell you all day, every single day to go with a CD and let it be. I love them. They are safe and reliable, and they are predictable. I like predictability. Many people do, which is why CDs are so popular with the general public. The rate of return might not be the highest of any particular investment account, but it’s safe and predictable and that takes away the stress and worry that you might feel with an alternative savings method. I love that.
They’re insured by the FDIC, you don’t lose money, and you know what you’re getting into. But how do you choose the right CD? With so many to choose from, it’s often a bit intimidating to pick and choose and go through the options without feeling a bit of the stress. We have some simple solutions for you to help guide you as you choose a CD to call your own.
What’s your time line?
The most important question to ask when choosing a CD is your time line. This is what you should base your choices off of when choosing an account, because it means the most to you. Do you simply want to invest for a month, or do you want to invest for 10 years? Whatever timeline you choose, you need to prepare yourself for; it’s what makes the different. Rates are based on the time you choose to hold money in your account, so that’s why it plays the biggest role in choosing the right CD.
To figure out how much time you want to invest your money, think of the end game. What are you investing in? Are you choosing to buy a new car in a year? If so, you might want to earn some interest on your money but not for longer than the time frame you need it to buy that new car. Do you have no end plan in mind, you just want to save? Then a long-term savings might be the best choice. Just know you have to pay a penalty if you withdraw your money early from a CD, which is why length of time matters so much.
What are the deposit requirements?
Many CDs require that account holders deposit a certain amount of money to open the account. You need to consider how much you have to save, how much the account requires and let it go from there. Fortunately, this is a fairly simple consideration. If you have $5,000 to save and the account requires you open the CD with at least $10,000, it’s not the CD account for you. All we are advising is that you do your due diligence and check first so that you’re not surprised when you go to open a CD and realize you have to start the process all over due to your deposit minimum.
What are the rates?
When it comes down to it, we all want to make the most out of our savings. The purpose of a CD is to allow us to save money while still earning interest on the money in that account. That means you want to know what rates are available to you, what you can earn and how long you need to save your money to earn that interest.
We know you want to make as much as possible as quickly as possible, so you’ll want to compare rates at certain banks. Not all banks offer the same terms, though most are pretty close. Do your homework and remember to check terms; just because one bank is offering a higher rate does not guarantee you will earn that rate. That rate might be for a longer term than what you want, but the bank wants to advertise the best rates to get people into the door and at their desks so that they can sell their product and services.