Money may fall into your lap when you least expect it. It can come from an inheritance, an insurance settlement or perhaps a work bonus.

There are undoubtedly plenty of things you can do with this free money. If you speak with friends or coworkers, they may suggest using the money on a fabulous vacation, shopping, or a few home improvements. These are all good uses, but if your personal finances aren’t where they should be, consider other uses.

I know, being responsible with free money might be the furthest thing from your mind. But truthfully speaking, the odds of this happening again are slim. Therefore, it makes sense to put this money to good use.

I’m not suggesting never enjoying this money. But since current CD rates are faring well, why not invest in a certificate of deposit and increase your savings?

A certificate of deposit is nothing more than another type of savings account. But don’t confuse these accounts with your regular savings account. A regular account with your bank is a great place to hold liquid cash for an emergency, such as a car repair or household bills. However, if you compare rates among different banks, you’ll find that regular savings accounts don’t earn a lot of interest. Therefore, your money isn’t likely to grow much – if at all.

Certificate of deposits are very different. As a time deposit, these accounts have rates that exceed those of a regular savings account. When you open a CD, you essentially give the bank access to your money. The bank will use your money for any purpose they see fit, whether it’s to create loans or invest.   Just remember that you can’t withdraw the money before the end of your CD term unless you’re willing to pay a penalty.

Banks are grateful for this type of help. As a thank-you to their customers, banks offer top rates to those who open CD accounts. However, you need to shop around. For example, your local bank may offer excellent rates. But if you go online and find out about Discover Bank’s current CD rates, you may come across rates that are higher than those offered by your bank.

This is not the only reason to take advantage of current CD rates. In addition to receiving a higher return on your money, you can’t lose your money.

If you’ve ever dabbled in the stock market, you know how easy it is to lose your investment. And frankly, you may prefer less riskier investment options. If that’s the case, a CD is right up your alley.

Certificate of deposits typically feature:

1. Flexible terms – Open a CD account and choose from a variety of terms. If you’re looking for a short-term investment, a three or six-month CD time might be a good match for your money. Then again, if you’re interested in a long-term investment, you can take your savings to a whole new level with a 10-year CD term

2. Out of sight, out of mind –  Unlike your regular savings account, which you can easily access with your bank debit card, a certificate of deposit does not allow easy withdrawals. You can withdraw money from this account before the end of your term, but you will pay an early withdrawal fee. Technically speaking, your money is off limits. Some customers prefer this way of banking – especially those who have difficulty saving money.

3. Compounding interest – Your deposit grows faster because you earn interest on your interest. Interest compounds differently depending on the type of CD and the bank. Some CD accounts compound interest daily, whereas others compound weekly or monthly.

4. Automatic rollover option – You can take money from your CD at the end of your term. But if you’re happy with the growth and you don’t want to stop a good thing, you can extend the length of your CD and let the bank automatically rollover or reinvest your money.

All good features, but let’s be honest. Most people will not acquire free money. Does this mean that a certificate of deposit is out the question? Absolutely not. Anyone can open a certificate of deposit, and oftentimes, you don’t need a lot of money. Depending on the bank, you can open a CD with as little as $500 to $1,000.

This is good news if you do not have a lot of cash stashed in the bank but are looking for a way to grow your personal savings.

So, how can you generate money to put into a CD? This may require a few financial sacrifices, as you’ll need enough money to meet the bank’s minimum deposit requirement. Therefore, think of ways to reduce your spending.

For example, how often do you shop or go out to dinner? Do you entertain on a weekly basis? Can you scale back and increase your disposable income? Do you regularly pay yourself first.

The less you spend, the more you can put into your CD. Opening an account may seem like a small move. However, this simple decision can jumpstart your savings and increase your net worth, which is one large step toward reaching bigger goals.


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