From the course: Financial Basics Everyone Should Know (2019)
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Using certificate of deposits
From the course: Financial Basics Everyone Should Know (2019)
Using certificate of deposits
- [Instructor] CDs are a critical product for the U.S. banking system. No, I'm not referring to the old plastic disks that held music. Instead, I'm talking about a product called a certificate of deposit, or CD, as it's commonly referred to. CDs act like savings accounts, but they pay a much higher interest rate because the person giving their money to the bank promises not to withdraw their money for a certain amount of time in the future. This is often somewhere between six months, up to maybe five years. The longer the term that the person locks their money up for, the higher the interest rate that they receive. Best of all, CDs are guaranteed by the bank, which in turn is backed by the federal government for up to $250,000 per account. Since the government can print all of the green pieces of paper at once, this essentially means that CDs are risk-free as an investment. Let's talk about the pros and cons. CDs offer a higher rate of interest than a savings account. They're…
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