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Saving and investing for the future is important for preparing for your retirement years while also making sure your family and loved ones are taken care of when you eventually pass away. Keeping money in cash you do not really need right away may not be preferable since inflation will continue to eat away at your money’s purchasing power. Essentially, doing nothing is actually costing you. 

On the other hand, with rising interest rates, geopolitical turmoil and supply chain issues, the stock market has become increasingly volatile with more risk of downside moves. With the volatility in the stock market lately and the many factors inhibiting economic growth, many people are looking for different, less risky ways to grow their money. 

One option you may want to consider is a Certificate of Deposit (CD). 

What is a Certificate of Deposit? 

A CD is a savings product you can obtain through banking institutions and credit unions allowing you to earn interest on deposited funds with relatively less risk compared to stocks and other more volatile investment instruments. With a CD you are agreeing to leave your initial amount of funds deposited and untouched for a specified period of time in exchange for the financial institution guaranteeing a predetermined rate of return. This allows you to have your money grow without having to worry about the difficulties of the stock market or other types of financial markets. 


Although each bank’s terms for CDs will differ, usually you will be charged a penalty if you end up withdrawing your funds before the predetermined period of time. On the other hand, there are some banks which do offer no-penalty CDs with a very short waiting period of time, usually around five or six days. Afterwards you will be free to withdraw funds without penalty. 

Interest rates 

The interest rates offered will vary depending on the bank. Usually, the longer the term the higher the interest rates. Most of the brick-and-mortar banks tend to offer lower interest rates compared to credit unions and online banks. You may also be able to obtain higher rates during special promotions which some banks offer on occasion. 

CDs vs. Money Market Accounts 

Another savings instrument, money market accounts are similar to CDs in they enable you to put away money and have your funds grow through interest rate payments. CDs require an initial deposit which must remain in the account until maturity in order to avoid penalties. On the other hand, money market accounts do not have a maturity date but will limit how frequently you are allowed to withdraw funds. Also, money market accounts allow you to continue to make additional deposits while this is not the case with a CD. 

Should you open a CD? 

Some type of savings plan should usually be a part of an effective personal financial plan. However, whether or not you should specifically choose a CD as opposed to some other type of savings instrument will depend on a variety of factors. A comprehensive review of your financial situation and objectives will help you make these important financial decisions. Contact us to you help decide what type of investments work for you now and in the future.




This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investments mentioned may not be suitable for all investors. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.


Investors should consider the investment objective, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing.