How to Save More Money with CDs
- Money Management
- Linda Ordway
If you want to create an emergency fund or set aside some extra cash to earn more interest than a typical Checking or Savings account, consider a Certificate of Deposit (CD) from C&N. This popular savings option helps you grow your hard-earned money faster than a standard Savings account, and opening a CD is easy. Why choose a CD over other Savings account options? Learn the basics of CDs and how they can benefit your savings goals.
What is a Certificate of Deposit or CD?
A Certificate of Deposit, or CD for short, is a smart savings option that allows you to deposit a minimum amount of money for a specific period of time. In exchange, you’ll receive higher interest payments than typically found with Money Market accounts and traditional Savings accounts. Additionally, a CD is backed by FDIC insurance.
You can choose the length of the term, ranging from months to years, and earn interest when your CD matures, then take the payout or reinvest in another CD. If you withdraw money before the maturity date, most banks will issue an early withdrawal penalty. It’s wise to invest in a CD when you can keep your money on deposit to maximize your savings.
If you don’t want to tie up too much of your savings into a single CD, consider a CD laddering strategy. This approach offers a way to spread out your investment using multiple CDs with different maturity dates.
With a laddering CD approach, you can grow your money at a higher interest rate than a typical Savings account, and you don’t need to tie up all your savings at once. For example, if you had $10,000 to invest, you could deposit that into four CDs of $2,500 with different terms. Once each CD matures, you could choose to move that money into a new CD or take the cash.
Here’s an example of how you could ladder various CDs*:
- 6-month CD: $2,500 at 0.550% APY
- 18-month CD: $2,500 at 0.700% APY
- 24-month CD: $2,500 at 0.750% APY
- 60-month CD: $2,500 at 0.800% APY
In this example, after 24 months, you’ll have grown $2,500 to $2,537.64. You can then deposit that money into a 60-month CD that earns 0.800% APY (Annual Percentage Yield), cash out or keep it in a different account. Once your 60-month CD matures, you can reinvest that money in another CD with a higher interest rate to keep the ladder going. The idea is to stagger the CDs and maturity dates, so you always have money invested and funds that become available without penalty. At C&N, the more money you invest for longer, the higher the yield.
CD terms and options
You can open a CD at C&N for a little as $1,000. Our terms range from six months to 60 months, with varying APYs, depending on the term, type and balance. See all C&N’s CD rates and use our Certificate of Deposit calculator to estimate how your savings could grow.
If you know you don’t need immediate access to your money and want to earn better rates than with a traditional Savings account, a CD may be a smart savings tool for you. C&N offers a variety of options, including fixed-rate and roll-up traditional CDs, fixed-rate and variable-rate IRA CDs and E-Z Access CDs to help you reach your long-term savings goals.
The experts at C&N are here to guide you through all life’s stages and can help you decide which savings account or CD makes the most financial sense. If you have any questions about how C&N can help grow your savings, contact us or visit one of our Pennsylvania or New York branches.
* These rates are representative. Actual rates may vary. The APY assumes interest remains on deposit until maturity. A withdrawal will reduce your earnings. Early withdrawal penalties may be imposed for early withdrawal. Fees may reduce the earnings on the account.