If you find good CD rates and you decide to put your money in certificates of deposit, you are making a good choice. However, you still need to know how to protect your money so you can build it up as efficiently and quickly as possible. Here are three tips to help you protect the money you have invested in a CD to help keep it and your future secure.
1. Get Insurance – The federal government insures CD accounts and other types of bank accounts up to $250,000. This means if the bank goes under or if something else happens, your money is protected for up to a quarter of a million bucks. The FDIC, or Federal Deposit Insurance Corporation, helps protect you assets as you allow you money to grow. If you have more than $250,000 to invest, spread your money across different accounts at different banks. Anything about $250,000 in any one account simply isn’t covered.
2. Remember Automatic Renewals – Some CD accounts, especially if you are enrolled in a CD laddering system, have an automatic renewal feature. This means that once the CD matures, the money is automatically rolled into another CD. If you are just letting your money grow, this is a good thing because you typically don’t even have to do anything for this to happen. However, if you were planning on cashing out the CD upon maturity, you may pay a penalty to withdraw the money if you forget about the automatic renewal. Fortunately, the bank will typically send you a reminder that you CD is about to renew automatically so you can make the appropriate choices before that happens.
3. Don’t Touch the Money – If you cannot afford to invest your money in an account that you cannot touch for several months or years, do not choose a CD as your investment vehicle. Every time you take money out of your CD account before it matures, you will pay a penalty. The penalty is based on several factors but it will ruin your chances of building up your account efficiently. Either leave the money in the CD account until it matures or do not invest in a CD at all.
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