This account is your savings strategy’s best friend!
You’ve been working hard to grow your finances and you should be proud! But sometimes you need a little extra help from your friends and what is a savings certificate if not a best bud to your financial portfolio. Whether you're saving for tuition, a special purchase, or creating a safety net for unexpected expenses, it could be a great financial option for you.
In this Clearview blog article, we’ll explore the pros, the cons, and the lingering question – what is a savings certificate?
What is a savings certificate?
A savings certificate, also known as a certificate of deposit, is a no-risk, higher-reward savings account that grows your money at higher interest rates compared to other account options. You choose how long you want to keep your money deposited, known as the term length, and your money earns dividends at a fixed rate for that term. Typically, the longer the terms and larger the deposits, the more you earn.
What are the advantages?
- Higher interest: They typically have higher interest rate than regular accounts, make them more attractive to those looking to boost their savings strategy.
- Consistency with earnings: Standard certificates have a fixed rate, giving people peace of mind knowing how much interest they can expect to accrue. There are special types such as a Bump Rate and Flex which offer special conditions and varying rates throughout the term.
- Greater flexibility: Many financial institutions offer multiple certificates with specific terms and interest rates, allowing you to stash your cash and watch it grow for as little or as long as you like. There's also no limit to the number of savings certificates you can open.
What are the disadvantages?
- Lack of liquidity: For the duration of the certificate’s term, your money will be tied up. If you end up needing access to that money, you may face penalties and ultimately receive less earnings. If you want an account with better liquidity of cash as part of your savings strategy, check out a Money Market account.
- Fixed rates: As the market fluctuates, so do interest rates. If interest rates rise, this can be seen as potential loss to your current fixed rate.
- Initial minimum deposit: To open, you’ll be required to make a minimum initial deposit. It can be stressful and even unrealistic to some to forgo a sum of cash and lock it up for a certain term.
We hope that this article finally answers the question – what is a savings a certificate? If you want to add one of these accounts to your savings strategy, check out our certificate options!