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How Should You Invest Your Money?

savings accounts and certificate of deposits

How to Choose Between Bonds vs. CD vs. Savings Accounts

Remember: Always consult a financial advisor before making investment decisions. This information just offers some basic guidelines.

If you need ready access to your money, get a savings account. If you need ready access to it but not in the next year, get a one-year CD. If you don’t need ready access to your money, get a bond or a 5+ year CD. If you have $250,000 or more to invest, get a bond. If you have less than $250,000 to invest and you want a higher return on your investment, get a 5+ year CD. If you have less than $250,000 to invest but want lower risk, get a bond.

Savings Accounts

A savings account is one of the only ways to generate a little bit of interest and still have access to withdrawing your money whenever you need it.

Pros

Savings accounts are insured by the FDIC, they have low account minimums and there is easy access to the funds.

Cons

Interest rates are obscenely low.

One-Year CDs

A Certificate of Deposit will get you better interest rates than a savings account, but it locks your money up for a set period of time. The longer the time, the more interest it pays.

Pros

CDs are insured by the FDIC and they have higher interest rates than savings accounts.

Five+ Year CDs

A longer-term CD will yield higher interest rates than most bonds and savings accounts; however, CDs generally aren’t a good option for institutional investors or those with upwards of $250K to invest.

Pros

CDs are insured by the FDIC, they have higher interest rates and it is easy to shop around for the best rates.

Cons

Your money is off-limits unless you want to pay a penalty. They are not backed by the government after $250K.

Bonds

Bonds are backed in full by the U.S. Government. Generally they are long-term and have hefty penalties for early withdrawals, but they are relatively secure and safe.

Pros

Bonds are government backed, have good long-term interest and are secure for large investments.

Cons

Your money is off-limits in a bond unless you want to pay a penalty. Some bonds, especially municipal bonds, yield lower interest than CDs.