The Federal Reserve has been steadily raising rates over the past two years, which means higher dividends on a variety of savings options such as certificates of deposit (also known as “term deposits”, “share certificates” or “investment certificates”). According to CNBC News, savings rates are now at more than 2.4 percent, up from an average 0.1 percent, before the Federal Reserve started increasing its benchmark rate in 2015. What’s more is that switching to a high-yield savings account could mean earning an average of an additional $500 in interest1.
Why investment certificates are ideal. If you have accumulated a healthy-sized savings and do not need to access the funds in the immediate future, an investment certificate is the way to go. Usually investment certificates are a low-risk option that offer a higher-yield interest rate that is fixed for a certain period of time (usually for as little as three months to five years). At the end of the fixed period, also known as the maturity date, you are free to access the funds, penalty free.
Other things to keep in mind.
- If you find yourself in an emergency and need to access the funds before a maturity date, you must forfeit the higher interest that has been accrued.
- The longer the term of your deposit, the higher the yield and the more you can accumulate in savings.
1Dickler, Jessica.Stashing cash finally pays, thanks to high-yield savings accounts.CNBC.17 Feb 2019.https://www.cnbc.com/2019/02/15/high-yield-savings-accounts-hit-decade-high.html