One option to consider when deciding how to save your money is a Certificate of Deposit (CD). A CD is generally considered a low-risk investment option, typically available from a bank or credit union, which provides you with a fixed-interest payout. The amount of the interest payout and the frequency with which they occur depend on the terms set by the bank or credit union.
CDs usually include:
- the amount you plan to invest (also known as “the principal”);
- the length of time you plan to invest your principal (also known as “the term”);
- the frequency with which you will receive interest payments; and
- the interest rate you’ll be paid.
Typically, CD interest rates are set by the institution that is selling them, and usually higher interest rates are provided to those who are willing to accept longer terms. When seeking a favorable interest rate, it’s best to shop around.
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