How to Save More Money with CDs/Share Certificates

Posted on 8/30/2019

How to Save More Money with CDs 

If you want to create an emergency fund or set aside some extra cash to earn more interest than a typical checking or savings account, consider a certificate of deposit (CD) from Needham Bank. This popular savings option helps you grow your hard-earned money faster than a standard savings account, and opening a CD is easy. Why choose a CD over other savings account options? Learn the basics of CDs and how they can benefit your savings goals. 

What is a certificate of deposit or CD?

A certificate of deposit, or CD for short, is a smart savings option that allows you to deposit a minimum amount of money for a specific period of time. In exchange, you’ll receive higher interest payments than typically found with money market accounts and traditional savings accounts. Additionally, a CD is backed by FDIC insurance so there is never a risk of losing any of your money.

You choose the length of the term, ranging from months to years, and earn interest when your CD matures, choosing to take the payout and reinvest in another CD. If you withdraw money before the maturity date, most banks will issue an early-withdrawal penalty, so it’s wise to choose this account when you can keep your money on deposit to maximize your savings. 

Laddering CDs

If you don’t want to tie up too much of your savings into a single CD, consider a CD laddering strategy. This approach offers a way to spread out your investment using multiple CDs with different maturity dates. 

With a laddering CD approach, you can grow your money at a higher interest rate than a typical savings account, and you don’t need to tie up all your savings at once. For example, if you had $10,000, you could deposit that into four CDs, each for $2,500 with different terms. Once each CD matures, you can choose to move that money into a new CD or take the cash. 

Here’s an example of how you could ladder various Needham Bank CDs: 

  • 3-month CD: $2,500 at 0.40% APY
  • 6-month CD: $2,500 at 2.15% APY
  • 18-month CD: $1,000 at 2.0% APY 
  • 2-year CD: $1,000 at 2.10% APY 
  • 5-year CD: $1,000 at 2.10% APY 

In this example, after 18 months, you’ll have grown your first $1,000 to $1,428.25. You could then deposit that money in a 5-year CD that earns 2.10% APY, cash out or keep that money in a different account. Once your 5-year CD matures, you can reinvest that money in another CD with a higher interest rate to keep the ladder going. The idea is to stagger the CDs and maturity dates so you always have money invested and funds that become available without penalty. 

CD terms and options

At Needham Bank, you can open a CD for a little as $1,000. Our terms range from three months to five years. To determine which might be the right term for you, log into online banking and use one of our investment calculators to see how much you could earn. Then, check out our current CD rates and easily apply for a CD online

Longer-term savings

If you know you don’t need immediate access to your money and want to earn better rates than with a traditional savings account, a CD may be the right savings tool for you. CD IRAs are also an option to help you reach your long-term savings goals.

The experts at Needham Bank are here to guide you through all life’s stages and can help you decide which savings account or CD option makes the most financial sense. 

If you have any questions about how Needham Bank can help grow your savings, visit us at one of our branches or contact us at your convenience.