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Use CDs to hit money goals

By Sheyna Steiner ·
Thursday, January 3, 2013
Posted: 4 pm ET

Raise your hand if saving money was a New Year's resolution this week.

Like losing weight, getting finances in order is a perennial resolution favorite. Going into 2013, nearly a third of Americans -- 32 percent -- resolved to improve their financial situations this year, according to a survey released in December by TD Ameritrade.

One way to achieve money goals and keep a nest egg growing is with a certificate of deposit. Though CD rates are very low right now, CDs can help keep you save by keeping your hand out of the cookie jar with an early withdrawal penalty.

Because the fees for breaking a CD early vary among financial institutions, be sure to read the terms of the contract before signing up. Some banks charge more than the CD would earn in interest while other banks enforce penalties that are the equivalent of a slap on the wrist.

If liquidity is more important than yield, stick to short-term maturities. For savings that won't be needed for years, choose longer-term maturities and earn more interest.

One final caveat: Only buy CDs insured by the Federal Deposit Insurance Corp. and offered by a trusted source. In this environment highlighted by low CD rates, scammers can easily fleece unwitting yield seekers. For more tips on safe saving, visit the FDIC website.

How do you plan to keep your financial resolutions? Is holding CDs part of your 2013 financial plan?

Follow me on Twitter: @SheynaSteiner

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