Savings is essential in financial planning. It is a first step before you move further to investment planning. There are plenty of places where you can put your savings in. Traditional savings account, fixed deposit or certificate of deposit, money market funds or even in below your pillow. If you want some return in with protection, you might want to save your money in the fixed deposit account (FD) / certificate of deposits (CD).
FD / CD is a special type of deposit account with a bank that typically offers a higher interest rate than a regular savings account. It is an investment account with protection because they are insured (mostly) like a savings account by the federal government agency.
When you buy FD / CD, you invest a fixed sum of money for a period of time - 6 months, 12 months, 15 months, 30 months and even 60 months. In exchange, the issuing bank pays you an interest at regular intervals.
This means that if you put $ 5000 in a regular savings account, you get almost nothing. However, if you put $ 5000 for 12 months in FD / CD, you may get your money back later plus an extra interest, 3% for example. Thus, you will make more money.
Piggy bank is enough for you?
But, the downside is if you redeem your FD / CD before it matures , you will pay penalty and also gain nothing. So, before you put your money in this type of account, you have to make sure that in any particular period before the account matured, you still have an extra money to cover your expenses and also for emergency purposes.
This type of savings account scheme may not only issued by a bank, but also by any financial institutions. Their broker or agent sometimes will call or mail you and offers a savings plan. And for the next post, I’ll give you questions to be asked to the agent / bank to make sure you are buying the right and safe savings plan.
For the meantime, you may like to watch another video on debt trap here:
The Debt Trap - One in every 60 U.S. households filed for bankruptcy in 2005. It’s likely someone in your family, a neighbor down the block or a co-worker in your office is in bankruptcy court. It’s not just an American problem either. Scotland has had a 33% rise in people losing there homes. For every $100 an Australian earns, they owe $130. What about you?
2 Trackbacks
[...] the previous post, you have read about Save Your Money in Certificate of Deposits / Fixed Deposits and now you will now what to be asked before you invest in [...]
[...] Generally dividend from money market funds are higher than savings account or certificate of deposits. [...]