The role of CD investments
That’s where certificates of deposit (CDs) come in. CDs are a way to boost your earnings above what you’d receive from a regular savings or checking account. In exchange for a guaranteed higher interest rate, you agree to invest your money for a specific amount of time—ranging from three months to five years—in a CD investment.
“The idea is to invest your money with a trusted bank that is FDIC-insured and that will earn you guaranteed interest over time, versus just taking your money and putting it in a low-interest earning bank account,” says Plescia. The combination of cash accounts with short-term and longer-term CDs is the key.
“A healthy portfolio combines cash accounts and short-term CDs for liquidity, with mid-term and long-term CD earnings (for future investment),” he says. The addition of CDs offers further advantages:
- The interest that you earn is guaranteed and not affected by market volatility.
- These products are insured by the FDIC and backed by the federal government.
The benefits of digital banking
The challenges created by COVID-19 have other implications for banking. Digital banks like AAA’s appeal to people who want to bank wherever and whenever they want and prefer to conduct their banking business in a contactless fashion instead of at a traditional bank branch.
“Any of our members can—from the comfort of their own home—call us, email us or go online and put their money in these protected accounts themselves,” says Plescia.
Whether your goal is safety, security or liquidity, the right blend of accounts and CD investments can help you attain it—even in uncertain times.