Earning money through investments can be tricky. You have some money you can invest, but don’t want to directly invest in the stock market. Investing in a certificate of deposit (CD) is a safe option that you can earn money from when done correctly.
Reasons to Invest in a CD
There are several reasons why choosing to invest in a CD may be the right financial move for you, including:
- Steady cash flow from interest
- Higher yielding interest than a normal savings account
- Good for those that have a hard time saving since there are pre-payment penalties associated with taking out money before the end of the CD term
CD Rates & Timeframes Affect How Much Money You Get Back
The type of CD you get and its timeframe will be a big factor of how much money you will earn. The rates for CD will vary depending on:
- The length of time they’re invested: From 1 year to 10 years, the longer your money is invested in a CD, the more interest you will gain from it.
- The amount of money that goes into the CD: The more money you invest will generally see higher returns.
- Where you obtain the CD: Typically, the best CD rates come from credit unions and community banks.
If you prefer an online bank, they can sometimes best option since they don’t carry the same overhead costs as traditional banks. This difference can make them a more affordable and profitable option.
Ladder Your CDs
By laddering your CDs, you have a steady flow of cash coming in when the CDs term ends and you withdraw your money plus interest. Laddering will help make sure that your money isn’t tied up in case you need it in an emergency.
Research Before You Invest
Before transferring over your savings to a CD, make sure the bank you want to use is:
- Financially stable
- Insured by the FDIC
Consult a trusted, financial professional before investing your money in a CD. They can discuss your options and help you find the right investment.