Saving money and having a strategy will help you improve your financial wellness now and in the future. One of the most common saving strategies is a Certificate which you can get at Kitsap Credit Union. But what is a Certificate? Keep reading to find out more information about this saving strategy.
A Share Certificate or Certificate of Deposit, also known in banks and credit unions as just a Certificate, comes in various terms and provides a higher yield or interest-earning than you would receive from a typical savings account. This is a popular strategy for many who set aside money to grow their savings. Certificates are a safe and convenient way to invest your money because, unlike high-risk investments like stocks, your money in a Certificate will always be federally protected. Share certificates and other deposit accounts are generally insured for up to $250,000 through the National Credit Union Administration (NCUA).
How does it work?
When you deposit your money into a Certificate, you’re required to keep the money in that account for the selected period. If you do this, you will receive the interest rate or yield specific to your term. You can almost always access your funds before the term is up if necessary, but there could be penalties usually in the form of fees. Once your Certificate matures, you can reinvest your money into another Certificate and do the process all over again!
Strategies to use
This strategy takes time and patience to see the outcome, but it can provide a safe and steady flow of interest income. The Laddering strategy helps to lessen both the interest rate and reinvestment risk by taking the total amount of money you plan to invest and dividing it equally across certificates with different maturity dates. You will be taking advantage of the highest rates each term. As each Certificate matures and grows, review the current interest rates. You can reinvest this money in a higher-interest rate Certificate or cash out!
This approach divides funds to invest in short-term and long-term certificates, reducing the amount of time it takes for your certificates to mature. The barbell strategy can help individuals with clear short-term, and long-term goals save better. A short-term Certificate will give you a higher interest rate than your average savings account, but a long-term Certificate will provide you with an even higher rate than both of these other options!
The Bullet strategy is geared toward those with larger savings goals. Over time, you will invest in several certificates and focus on specific maturity dates. This strategy will give you a higher rate of return on savings, provide you with more money as the certificate matures, and help you earn more from your investment.
If you find yourself holding onto your savings for a significant event, future vacation, or retirement, you should consider a Certificate. Through this process, you can store your money somewhere safe and secure and have complete confidence that you will get your money back and some interest at the end of your term.
Contact to our member service specialists for more information.