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Ahorre para el futuro con un certificado de depósito

Saving for the future with a CD

By Anna Haug

Have you considered all of your options for saving for the future? One option for long term savings is a certificate of deposit, also called a CD.

Certificate of Deposit

A CD is a type of savings account typically with a higher rate of return and no cost to open.  CDs let you keep money in a credit union for a fixed amount of time. In general, the more money you have in the CD, the higher the interest rate will be. Often, the longer your leave the money at the credit union, the higher the interest rate of the account will be.

Some CDs require that you deposit the entire amount at the start of the CD time frame. Other CDs may allow you to continue to contribute to the CD for a set period of time such as 12 months.

Considerations

here are several things to consider when deciding if a CD is right for you and your financial needs. One advantage of a CD is that the amount is secured up to $250,000 at the credit union through the NCUA. Opening a CD might be ideal if you have earnings such as from the sale of a house or your income tax return and you don't plan on using it right away.

A CD might not be the best option for short term financial goals. If  you take out the money from a CD before the time is up, you will need to pay a penalty. It may not be the best choice either if you are looking for a huge rate of return. Although a CD does earn interest, rates may vary anywhere from .10% - 3% and up.

Uses

There are many reasons to use a CD for long term savings, but it's always important to establish a long-term goal first. One option would be to use a CD for putting away funds for retirement if it is years away. Another reason to consider saving in a CD is for educational expenses for your children.

As Latinos, we are sometimes not used to saving for something that will happen so far in the future, but the sooner you start saving, the more you will accumulate and if an emergency were to occur, you have those funds to draw from, even though there may be a  a penalty fee. It is a great option for any long term savings goals such as saving for a home or car.

Contact your credit union to learn about what options they have for saving in a CD or other savings options.

Published 09/27/2010

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