Is Investing in a CD Worth It?

Is Investing in a CD Worth It?

Investing is something that some people avoid due to the risks involved. However, there are certain investments with guaranteed returns on investment. Certificates of deposit (CDs), for example, guarantee you a significant financial return, as long as you follow the guidelines. Learning more about how CDs work may help you decide whether to use them to grow your money. If you are facing bankruptcy, then try talking with a Chattanooga bankruptcy lawyer for help.

How Certificates of Deposit Work

Finding out how certificates of deposit work can help you decide whether they could benefit your financial situation. A certificate of deposit (CD) is like a savings account, except a certificate of deposit usually has a higher interest rate. This means your money could grow significantly faster in a CD account than in a savings account.

The only catch is you cannot withdraw money from a CD as easily as a savings account. You can withdraw money from a savings account at any time with few limitations. A CD is an agreed-upon length of keeping your money in one place. Withdrawing money from a CD is possible but may come with penalties.

These penalties may include losing all the interest that grew from your CD or fees for withdrawing. People with extra money like investing in CDs to grow their extra money even more. CDs can be used for a variety of reasons like:

  • Building an emergency fund

  • Saving for a house

  • Saving for a car

  • A vacation

  • College fund

The best part is you have options. Not every CD is the same. Some CDs last six months while others last one year. There are several types of CDs like add-on CDs and CD laddering. Add-on CDs can help you continue growing your money because these let you continue to add money to your CD.

CD laddering is a method of investing in multiple CDs. This looks like investing in CDs of different lengths to build money while reducing the risk of needing money to withdraw from a CD. For example, someone would invest in a six-month and one-year-long CD simultaneously.

Other Investment Options

CDs are not your only option for growing money. Other ways to invest include bonds, stocks, and mutual funds. Bonds are usually more reliable when from the United States government. You invest money in a bond, wait for interest to grow, then your bond matures, and you receive what you invested plus interest.

Stocks involve buying a share of a large company. Companies that perform well will be able to pay you more of this share. The risk comes when the company starts failing. Mutual funds involve investors who invest your money in bonds, stocks, and other financial securities.

Contact Tom Bible Law Today

Investing may not always go as planned. Do not hesitate to contact us at Tom Bible Law today at (423) 424-3116 for a consultation about your financial struggles. Our legal team of Tennessee bankruptcy attorneys is ready to help you explore a multitude of options related to bankruptcy. We are located in the Tennessee cities of Chattanooga and Tullahoma.

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