The Value of CDs for Young Investors

Some might wonder if the wait to see the returns from their Certificate of Deposit (CD) investment is worth the wait. The answer is yes! With CDs, the APY is fixed, ensuring a predictable return with no changes or surprises.

For young investors with presumably less money to put into investing, a CD can be an excellent way to receive guaranteed returns against market fluctuations. Why is there so much talk about them lately? This is due to the rise in interest rates.

CD rates are closely tied to the federal funds rate, which is set by the Federal Reserve. When the Fed raises its benchmark rate, CD rates typically increase as well. This pattern is similar to how mortgage rates, savings rates, and credit card interest rates respond to changes in the Fed’s rate – discussed in this article by Forbes Advisor. This means higher rates lead to higher returns on a CD you invest in, making it a great opportunity.

Investing in a Certificate of Deposit (CD) can be a smart financial decision for young people today for a variety of reasons:

1. Guaranteed Returns
   
   CDs offer a fixed interest rate for a specified term. This guarantees a certain return on investment, providing stability in uncertain markets.
2. Safety
   
   Christian Financial is NCUA insured, protecting your money. The NCUA regulates and insures credit unions, ensuring member security. Your CD’s performance is stable and unaffected by market fluctuations. Open your CD online in minutes and fund it from outside or within your Christian Financial account.
3. Encourages Saving Discipline
   
   Since withdrawing money from a CD before it matures usually incurs penalties, it encourages young people to be disciplined about their savings and not withdraw funds impulsively.
4. Short-Term and Long-Term Options
   
   CDs come in various term lengths, from a few months to several years. Choose terms that align with their financial goals, whether they are saving for a short-term goal or looking to grow money over a longer period.
5. Financial Security
   
   Building a habit of saving and investing early on can help young people achieve financial security and prepare for future financial goals, such as buying a home, starting a business, or furthering education.
6. Supports Long-Term Planning
   
   Investing in CDs can be part of a long-term financial plan, encouraging young people to think about their future financial needs and set goals accordingly.

Interested in seeing what you could save with a CFCU CD? Calculate below!