Teaching your children to start investing at a young age can help them be financially responsible as they grow older.
The importance of saving for difficult financial times has never been more evident than it has in the last couple years. The downturn of the economy and the loss of jobs across the nation have made many families wake up and start investing their money. As a result, they have also been teaching their kids how to save money for the future.
Starting young is important when emphasizing the importance of saving money. One way to do this at a young age is to teach them how to open a certificate of deposit, or CD. Opening a CD has an advantage to investing in other accounts. A CD account is not as liquid as other accounts, meaning you cannot simply take the money out of the account whenever you want it. Instead, a CD is designed for long-term investment and saving. If you take the money out of the account before the CD matures, you will have to pay a penalty. This is a good lessons for your kids to show them how to put their money away and forget about it while it works for them.
There are CD accounts designed specifically for kids, too. These types of CD accounts offer low starting investments (some as low as $100), the option of adding more money regularly and a free savings book with shows your child how their money is growing as the days and months go by. The Young Americans Center for Financial Education is dedicated to helping young people learn the importance of saving and it offers several types of investment accounts that kids can open. The money is insured by the FDIC and it gives children the opportunity to save their money safely.
If you cannot find an account like that, you can still invest in a traditional CD account. Put the account in your name but use your child’s money as the investment. They will have a stronger emotional attachment to it so they will want to watch closely as it grows.
Teaching your kids about CDs, CD rates and other things that go along with investing will help them compete in a tough world. By starting early, you may be saving them from the turmoil and other problems that many people went through recently with the economic downturn. Don’t you think your kids deserve it?
Which is better - CDs or money market accounts? It really depends on what your investing needs are.
There is often a disagreement between people who invest their money as to which is better: a certificate of deposit or a money market account. If you have come across this argument at some point or wondered yourself which one is better, here are some benefits of each to help you make your decision.
Benefits of a CD
One of the main benefits of investing in a CD is that you can calculate how much your money is going to earn for you when you make your initial investment. If you have a CD with a rate of 2 percent, you know your investment of $100,000 is going to earn you about $2,000 each year.
A certificate of deposit is also beneficial for investors who will not need their money until the CD actually matures. Many senior citizens put their savings in a CD because it will grow and they will not touch the money because they have other sources of income that they use for paying their bills and everyday expenses.
Benefits of a Money Market Account
Money markets are similar to certificates of deposit. However, the main benefit that you get with a money market account is that you can write checks on your balance. With a money market account, money managers typically use your money to invest in other products, such as bonds, CDs, t-bills and so forth. The owner of the account then gets the pay out from those investments.
Most banks and financial institutions offer money market accounts to customers. Making a deposit into your money market account is as easy as depositing it into your checking or savings account. One main problem that goes along with a money market account, however, is that many people do not have the discipline to just leave the money there. Since you get a checkbook with your account, it is easy and tempting to use the money in the account on a whim. As a result, it is difficult to build up funds and have your money work for you.
Both of these financial investing products have benefits that you can enjoy. However, it is up to you to decide which one is best for you, your situation and your spending discipline.
Have you been looking for a CD for investing your money? High interest rates may seem appealing, but are they really the best bet?
When looking for the best CD rates in your area, it is probably very tempting to find the bank with the highest rates and deposit your money there. However, this may not always be the best thing for you or your money.
Last week’s news of IndyMac’s financial problems has sparked at rush of people closing their accounts and pulling their money out of this popular financial institution. IndyMac’s stock has plummeted to almost zilch and customers are not happy about that. One of the main benefits that the bank was offering, however, was a high CD interest rate. In fact, it was one of the highest CD rates in the entire country!
IndyMac is just one example that the highest CD rates are not always better. Many times, banks will offer high interest rates in return for attracting new customers. But IndyMac isn’t the only one that has been known to do this. Countrywide did the same thing last year by offering one of the highest interest rates in California. Recently, however, Bank of America had to rescue Countrywide because they were hurting for money. The reason this happens so often is because some banks use the new money that comes in from the new CDs in order to pay off old debts or interest to other customers. It’s similar to the Ponzi scheme that Bernie Madoff is doing time for in the iron city.
Luckily, the majority of Americans investing their money in CDs do not have to worry about losing their shirts if the bank in which they have their money invested goes under. The FDIC, or Federal Deposit Insurance Corporation, insures the money up to $100,000 so if you have less than that invested in the bank, you should be protected. When the bank fails, the FDIC moves your money to another bank or financial institution where you still have access to it. One bad thing about that is that the new bank is not required to offer the original interest rate from the previous agreement. In those cases, you could be losing some money overall.
Another bad thing about investing in CDs through shaky banks is that the banks that need the money are not worried about paying out the interest rates. When the bank goes under, the FDIC uses the government’s money to cover those assets. That means the cost gets passed on to the taxpayers. If several banks fail within a short period of time, that could be disastrous to the economy over time.
There are two things to keep in mind if you find decent CD rates at a bank. For one, make sure the bank is FDIC insured so your money is protected. That’s most important. Also, use your judgment. If a bank’s CD interest rates seem too good to be true, they probably are. Look for a bank offering a rate that is more like the norm to keep you money in good shape.
BestCashCow is the most comprehensive bank rate site on the Internet. Since 2005, we have monitored savings account, money market account and Certificate of Deposit rates from over 8,000 banks and 7,700 credit unions to find and display the best offers for those looking to earn and save more. You can learn more about the company here.
BestCashCow is the most comprehensive bank rate site on the Internet. Since 2005, we have monitored savings account, money market account and Certificate of Deposit rates from over 8,000 banks and 7,700 credit unions to find and display the best offers for those looking to earn and save more. You can learn more about the company here.
