With so much uncertainty in the financial market, being able to rely on a tried-and-true method to growing wealth is what many Americans need.

Considered to be one of the safest investments, a certificate of deposit (CD) provides this very level of reassurance. CDs are a type of deposit product offered by banks and credit unions that are very much like a savings account, but hold a handful of unique benefits unto itself.

#1. Higher Returns

While a certificate of deposit is as easy to get started as a savings account, one of the biggest differences is that it offers exceptionally better interest rates for greater earnings. Despite average CD rates at under one percent (0.25%) presently, interest rates are far higher than the average national savings account rate of 0.08%.

The higher the CD rate, the faster depositors reach their personal savings goals.

#2. Laddering Ability

One common drawback that savers refer to when discussing certificates of deposit is the fact that it offers less liquidity. However, by implementing a CD laddering strategy wherein separate CDs of varying maturities (e.g. 6 months, 1 year, 2 years, etc.) are activated, so that depositors always maintain some level of liquidity as each account matures.

#3. Low Risk

CDs are insured by the federal government, which means that if the bank fails depositors won’t lose their money up to a specific dollar amount.

For banks, it’s the Federal Deposit Insurance Corporation (FDIC) that regulates funds and provides deposit insurance for up to $250,000 per depositor per bank — the same insurance applies to credit unions that are overseen by the National Credit Union Administration (NCUA).

If savers have more than $250,000 to deposit, dividing up funds into different accounts is recommended to ensure that savings are always protected in the event of a bank closure.

#4. CD Varieties

There are many different types of CD products on the market that can suit any saver’s needs. Most institutions offer a variety of term duration options, from 6 months for those who don’t necessarily want to commit their funds for the long term to a 5 year certificate of deposit that keeps funds growing year over year.

Other CD options include jumbo CDs and variable rate CDs and bump-up CDs that all offer their own unique advantages compared to a traditional certificate of deposit.

#5. Locked-In Funds

It may seem like locking savings into a deposit account is a bad idea, however, with so many Americans still struggling to get a starter reserve savings fund up and going, keeping money in a hands-off account, like a CD may pose a huge benefit to depositors who lack self-control.

In addition to funds being tied to the account, withdrawing funds before the account matures typically leads to penalties against earnings which is a great deterrent for those who have a habit of overspending.

Overall, CDs are a relatively simple and straightforward way to invest and save. Depositors can walk into their local bank or credit union to shop for a personal CD account.

Also, with the growth of online CDs being showcased on the web, finding the best CD rates online is not only convenient, it’s fa

source:www.gobankingrate .com