Certificate of Deposit
By Andy Wichmann and Lauren Hooper
What is a Certificate of Deposit? (CD)
An account at a depository institution that is used for a fixed period of time and allows restricted access to the funds deposited.
What is CD interest?
It varied depending upon the specified time length and amount of money deposited. In most cases, the longer the length of the CD and the higher deposited funds, the higher interest rate.
What is CD liquidity?
The least liquid savings tool. If the funds are withdrawn before the end of the designated time period, the owner will be assessed with penalty fees.
What are some features of CD?
- Deposits have to be held for a certain length of time; time periods usually range from seven days to ten years or more.
- Deposits can range from $100-$250,000.
- If funds are held for the designated time period, then there is limited risk and no fees.
At what point in the life cycle would this tool be used and why?
You can use it as a kid. You can put your money in, let the interest build and then you can take it out and redo the process.
When would the tool not be a good fit for reaching a financial goal?
When you don't have much money.