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Earning More With Less Risk: The Benefits of Certificates

Having a savings plan is important for reaching your financial goals. What are you saving for? How can you maximize your savings to reach these goals sooner? You’ve worked hard for your money; now it’s time your money works hard for you. 

If you are looking for an easy, low-risk way to save money, it may be time to open a certificate account. A share certificate or certificate of deposit (CD) is a savings product typically offering higher interest rates than traditional savings accounts. You may have been taught that high yields only come from high-risk investing, and while high risks can produce high rewards, it’s not the only way. Not everyone is in a position where they can gamble their savings with risky investments. Fortunately, certificates can bridge the gap. You can use a certificate of deposit calculator like Capital Credit Union’s to see just how much you can earn in dividends. Earn more with less risk and begin your journey to financial freedom. 

Understanding Certificates and How They Work 

A share certificate earns interest on a sum total for a fixed period of time. Unlike in a traditional savings account, the money remains in the account for the entirety of the term to avoid early withdrawal penalties. In exchange for keeping the total sum untouched for the fixed term, you can earn higher dividend rates than a standard savings account. Watch your money grow faster with guaranteed returns. Certificates are a great way to safely invest money and reach your financial goals sooner. 

Though certificate terms vary depending on the financial institution, you can expect several factors to remain the same no matter where you choose to open your account. For instance, term lengths typically range from 3 to 60 months, during which time all funds are expected to remain in the account. Accessing the money before the term is up could result in a penalty fee. Once the certificate reaches maturity, however, you can withdraw funds without penalty. 

Another factor that remains the same for all certificate accounts is that once your contract is locked in, the interest rate is fixed throughout the term. You should be able to determine just how much you’ll earn over the life of the share certificate. Both the length of time and principal affect how much interest your account will yield. Typically, the larger the deposit and the longer the term, the more earnings you will receive. 

You can use a certificate of deposit calculator to determine how much interest you will accumulate over the life of the certificate. This can help you decide how much to deposit and for how long. Depending on the certificate, interest will compound monthly or quarterly and is directly deposited into your account. 

Now that you understand how share certificates work, let’s look at some of the benefits of investing in certificates. 

Higher Returns 

Certificates are as safe as traditional savings accounts though with higher dividends. If you have a lump sum you can set aside for a period of time, you can earn money faster than leaving it in your regular savings account. Plus, you get to pick the term length and deposit amount. Only invest what you can comfortably live without and make sure to keep enough in your regular savings account for daily expenses and emergencies. 

Certificates can also be combined with other savings products for maximized savings. If you are looking for short-term or long-term savings options to build up enough money for college, a dream vacation, a wedding, a future down payment on a home or car, the arrival of a new family member, home renovations, or other financial goals, certificates are a safe place to accrue extra savings for all of life’s plans. 

Fixed Interest Rate

With certificates, you know exactly how much interest you will receive once it matures. This makes certificates secure and predictable. Though stocks and bonds can offer higher returns, there is no guarantee of a return at all. In fact, you could lose your money. Stocks and bonds are more volatile; as the market fluctuates, investors can end up with nothing if the market drops too low or a company goes bankrupt. 

Fortunately, certificates have a fixed interest rate. Risk-averse investors know how much they are depositing, for how long, and at what interest rate. If interest rates drop, you are still guaranteed the interest rate in your contract. 

Predictable Returns

If you prefer to invest your capital with secure and predictable outcomes, certificates are ideal. Your rate is guaranteed, and your earnings will be what’s expected. Easily plan for the future with set parameters. Decide how much money you can afford to invest, how long you can live without it, and when you need access to your funds again. If you have a precise amount you are trying to earn, you can choose the term length and principal that will guarantee those returns. This allows you to comfortably plan for financial goals you know you can reach. 

Secure Investing 

They’re not lower risk; certificates are federally protected by the US government. If you open your certificate account with a bank, your money is insured by the Federal Deposit Insurance Corporation (FDIC). If you open it with a credit union, your funds are insured by the National Credit Union Administration (NCUA). Typically, your funds are insured up to $250,000 with FDIC- or NCUA-insured institutions. If your bank or credit union fails, your money is protected. Shop around and make sure to select a financial institution that carries FDIC or NCUA insurance. 

Avoid Unwanted Spending

When you lock your money away for a fixed period, it allows you to accrue extra savings without the temptation to spend. If you are saving for an important financial goal, you want to minimize the ability to prematurely spend money before reaching this goal. With money easily accessible in your savings account, you may be tempted to spend it sooner and prolong attaining your financial milestone. Reach your goal sooner, without dipping into the account to cover unexpected expenses or impulse purchases. 

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When you are ready to earn more with less effort, open your certificate account with Capital Credit Union. Getting started is easy: open an account to earn a higher rate with our 8 Month certificate special, and watch your money grow. No withdrawals, no deposits, no effort, just earning! Get started today! 

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