As you weigh low-risk options for growing your money, a bank CD’s relatively predictable return provides a secure way to reward your saving efforts. Before you begin your search for a certificate of deposit, make sure it’s the right move with a quick financial self-assessment.
Consider these three questions before you invest in a bank CD:
How much money can I commit to this account?
As you consider putting money into a bank CD, you want to make sure that committing money to your account won’t leave you without money you need for essential expenses. Saving money is a wise decision, but only if you understand how to adjust your budget. Plot out your monthly expenses to determine how much money you can afford to put away.
How long can I allow this money to mature?
Before you open a bank CD, consider any expected upcoming expenses. Will you be buying a car in the near future? Do you have educational debt you still need to pay off? While you may feel comfortable putting $10,000 in your account now, think forward to see if that amount is correct. From three months to five years, you can choose a bank CD with terms that fit your financial future.
Will I place significant limitations on my spending power with this amount of money?
If you have any concerns that you will need to withdraw funds from your bank CD early, think twice before opening that account. Bankrate’s 2010 survey of early withdrawal penalties shows that the majority of banks assess hefty fees for breaching your initial terms of maturity. You can explore alternative options to yield a return such as a high-yield checking account.
Ready to start searching for the right bank CD for your money? Use Bankrate’s Nationwide CD Comparison Tool to find the best interest rates available.