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Make Certificates Work For You

How do certificates (CDs) grow? A well-planned CD strategy can be an effective savings tool. CDs can generate benefits and preserve wealth. Here are tips to make it work for you.


You can diversify your CD portfolio just like your other investment portfolios, such as stocks. You can invest in multiple CDs with various terms. A CD ladder can lower risk, take advantage of higher rates and increase liquidity. You simply divide your money and get a one-year, a two-year, and a three-year CD. Roll each into a three-year CD at maturity. Learn more about laddering.

Minimize interest rate risk

If you are looking to preserve your money to live on right now, look to minimize interest rate risk. Consider CDs with shorter maturities rather than long-term yields. When interest rates are predicted to rise, a good choice is a jump-up CD. A jump-up CD allows you to request a rate increase during the term, if the rates go up.

Compound your interest

Most CDs allow you to add money during the grace period after maturity. You can save additional money in a high-yield money market and then add it into your certificate. This keeps your money growing in safety if you do not want to manage separate certificates.

Secure a loan

You may be able to borrow against a CD. If you have a high-interest CD that has a substantial withdrawal penalty but need money quickly, you could use it as collateral. A CD could also secure a mortgage loan.

Get higher returns

Local credit unions may offer higher yields than traditional banks. In addition, they give back to the community by providing financial education, low-rate loans, higher dividend/interest rates, and equal treatment regardless of the amount of money you have with them.

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