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Searching for Something Better? Try a Term Deposit

Sometimes it’s nice to be able to have the end of your goal in sight—like when you’re sitting in traffic or when you’re trying to achieve an objective, particularly a financial one.

That’s why I like term deposits, a.k.a. CDs. They help you reach savings goals while giving you an end result that you can see and plan for.

Term deposits are short-term investments, ranging anywhere from six months to several years. Essentially, they’re an addendum to your savings or checking account, with a higher-interest payout. They’re a very safe investment, and you know up front what your return will be. They are short-term investments, ranging anywhere from six months to a few years. Essentially, they’re an addendum to your savings or checking account, with a higher interest payout. They’re a very safe investment, and you know up front what your return will be.

Term deposits are great when you have money that you’d like to invest, but you don’t want to do anything too risky. For example, you have $500 that you want to put toward a European vacation in a few years. Sock it away in your regular savings account where it might earn only 0.2% interest, and at the end of three years, it’s gained only $3—about the price of a croissant. If you take that same $500 and put it in a three-year term deposit with a fixed rate of 1.0% compounded annually, you’d earn $15—five times the return.

Now, if term deposits are so great, why don’t you have any in your portfolio yet? Because they’re often overlooked in favor of high-risk, high-reward investments or others that come with tax benefits. With a term deposit, though, you’re looking at a short-term investment with a guaranteed payout that doesn’t tie up your cash for a long time. They also provide a better interest rate than a regular savings account.

One more benefit to term deposits: if you have kids or grandkids and want to teach them about investing, term deposits are a great place to start. Youth term deposits are available at Mountain America Credit Union, with a minimum deposit of just $25, so your kids can watch their money grow as they grow. Contact us today!