Savings Accounts vs. Certificates of Deposit (CDs)
When choosing where to store your money, Savings Accounts and Certificates of Deposit (CDs) are two popular options. Each has its advantages and disadvantages, depending on your needs and financial goals.
Savings Accounts
- Savings accounts are bank accounts that typically earn interest.
- You can withdraw money as needed, although some banks limit the number of times you can make certain types of withdrawals.
- A savings account is a good choice if you need to access your money in the near future.
- Savings accounts are especially good for emergency funds because they can give you quick access to money if you have an unexpected expense .
Certificates of Deposit (CDs):
- CDs generally offer higher interest rates than savings accounts.
- A CD is a time deposit, meaning you commit to leaving your full balance in the account for an agreed upon period of time.
- A CD may be a better choice than a savings account if you know you won’t need to access your money right away.
- With a CD, you are guaranteed to earn a certain rate of return on your savings, but you have to agree to leave the money in the CD until its maturity date.
Conclusion
Choosing between a savings account and a CD largely depends on your individual financial needs and goals. If you need flexible access to your money, a savings account may be the best option. However, if you’re willing to leave your money untouched for a specific period of time in exchange for a higher interest rate, a CD may be the right choice for you.
