CDs 101: Earn more on your savings today

Certificates of Deposit, or CDs, are a type of financial account that is designed to hold a fixed amount of money for a fixed amount of time. In return, the financial institution that issues your CD will pay you interest.

What do you need to know about CDs?
There is a lot to consider when deciding whether a Certificate of Deposit (CD) is the right savings option for you. Here are a few key points to keep in mind:

  1. Your funds are fixed: While typical savings accounts allow you to deposit and withdraw money, CDs require that you deposit a fixed amount of money at the time you open the account. You generally cannot make deposits after that time.

  2. Your term is fixed: Although you may select the period that you would like for your CD to mature, such as six months, one year, or five years, you are then locked into that time commitment. If you need to withdraw funds before that time ends, you may have to pay a penalty fee.

  3. Low-risk and highly predictable: Since you know the amount of money in the account, the interest rate, and the period that your funds will remain in the CD, you may predict the amount of interest you will earn without being subject to much risk.

What should I look for in a CD?
Select the term that matches your goal's time line. Some CDs, like the TD Choice CD, reward savers with better interest rates if you deposit more money or have an existing relationship with your bank.

CD accounts usually assess a penalty if you withdraw money before the term ends. However, some, like the TD No-Catch CD, give you the flexibility to access your money during the term.

How does a CD fit into your savings plan?
CDs can help you grow your money for future goals rather than spending now. If you're an impulse shopper or need help saving, CDs are great for short- or long-term goals, including:

  1. Education

  2. Travel

  3. Home improvement

  4. Retirement

If you're not sure what to do with your current savings, your recent tax return, work bonus or a recently sold house or car – a CD is a safe and rewarding way to earn more interest on your money.

How to save

You can really amp up your savings when you open a CD. Here’s how to get started:

  • Create a weekly or monthly savings plan with a goal
    This will put you on the right track to financial freedom
  • When you hit your goal, use those funds to open a CD
    Talk to your bank and select a CD with the term that matches your goal's time line
  • Watch your savings grow faster than in a traditional account
    CDs offer more savings rewards than a traditional account but are still safe and predictable

This article is for general informational purposes only. It is not intended to provide specific financial, investment, tax, legal, accounting, or other advice and should not be acted or relied upon without the advice of a professional advisor. A professional advisor will recommend action based on your personal circumstances and the most recent information available.

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