How Certificates of Deposit Can Benefit Young Investors
How CDs actually work
When you open a CD, you're agreeing to keep a certain amount of money stashed away in that account for a specific time period. In exchange, the bank will provide interest on that cash, which is significantly higher than you'd find with something like a traditional savings account.
An example of CDs in action
Let's say you have $1,000 that you want to invest in a CD, and you choose a 6-month CD with a 5% APY. By the end of the term, you'd get $25 in interest on your original investment.
Why CDs are great tools for young investors
CDs can be an excellent way to help protect investments against market fluctuations, offering a fixed APY and safe, FDIC-insured savings. Strategies like CD laddering can further enhance the benefits of investing in CDs, providing a reliable and steady financial cushion over time.
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