Learn About Certificates of Deposit (CDs)

Some natural courses of life can end up saving you money – like moving in with your significant other or a pandemic that forces you to drink at home instead of going to bars.

When those times come, it will be very tempting to spend that money.

One option for keeping those savings from being spent is to open a Certificate of Deposit – either individually or together.

Certificates of Deposit are another service banks can offer, in addition to savings and checking accounts and credit and debit cards.

CDs, as they’re often called, offer you guaranteed interest on the money, at a rate higher than a savings account. (No ’90s music included.)

The money is locked up for a set period of time. For example, if you get a CD for five years, you can’t access that money during that time without significant financial penalty.

But you get all the money all back at the end plus interest. It sort of forces you to keep it for the future.

Example: you put in $5,000 for five years at 3% interest. If you keep the money inside the CD the whole time, you’ll have $5,808 at the end of five years. Or you could get interest payments monthly during that time, which would be, like, $150 a year for $750 total.

Interest rates and lengths of CD vary, so comparison shopping is important. Different banks offer CDs from 3 months to seven years, and the rates vary by bank and length of commitment.