No matter where you are in life, you could probably benefit from earning a bit more interest on your savings.

There are different ways to do that. You can invest in stocks, bonds or mutual funds. These types of investments are great tools to add to your savings mix, especially for long-term savings goals. They can be volatile, but tend to give high returns over a long period of time.

But you will want to keep a portion of your savings in an insured account that can offer a higher interest rate than your standard share account. And here’s one option: a certificate.

You may have heard these called CDs, certificates of deposit, or share certificates. Although the names differ based on the financial institution offering them, they work the same way. You deposit your funds for a specified amount of time, and you earn a higher interest rate than you get with a standard savings account. In general, the longer you commit your money, the higher the rate.

You can usually find fixed-rate and variable-rate options for certificate accounts.

The Pros

The main benefit is that higher interest rate. These accounts are also fully insured up to the legal limits, and it’s easy to start them here at SoundView.

If you have an emergency and need to withdraw your fund before the maturity period, you can, although there is usually a small penalty.

The Cons

To receive the maximum benefit, you have to commit to not withdraw your funds for a specified period, usually somewhere between six months and five years. As mentioned previously, you can usually access these funds in an emergency, but you will likely be assessed a fee.

With longer certificates, interest rates may rise so that the high rate you got when you started ends up not being as good as other options.

You typically need a fairly large amount of savings to open a certificate, so they may not be a good option for those of more modest means or who are just getting started. But we’ve recently lowered our opening amount to $500 to open a certificate, which is markedly less than other financial institutions.  

As with most things involving your money, diversification is often a good policy. Rather than keeping all of your savings in your share account or investing all of it in the stock market, consider adding a SoundView certificate account to your savings portfolio. Now is a great time to get started; we’ve recently raised our rates and are paying nearly two times what Connecticut banks are. Learn more here, or contact us today.