Did you know that your savings portfolio should be diversified just like your investments? Financial experts recommend giving your savings as much chance at growth as possible. Let’s take a look at an especially great choice for diversifying your savings: a share certificate.
What is a share certificate?
A share certificate is an insured savings account with a fixed dividend rate with a set date of maturity, commonly referred to as a “term.” The funds in these accounts will grow with a dividend rate that is usually higher than those of typical share savings accounts, and even some money market accounts, too.
How is a share certificate different from a savings account?
There are several differences between a share certificate and a share savings account, but the primary factor that sets them apart is the accessibility of the funds. Whereas a savings account will have minimal restrictions or penalties on withdrawals, the funds deposited into a share certificate cannot be withdrawn until the maturity date. If the account holder goes ahead and withdraws the funds, they’ll usually pay a penalty for early withdrawal, which can sometimes be more than the dividends it has earned.
Terms and conditions of certificates
As a member of Cooperative Teachers Credit Union, you can open up a savings certificate today. However, there are some basic requirements. These include having the required minimum opening balance and committing to keeping your money in the account for a set amount of time.
The minimum amount of funds you’ll need to deposit to open a certificate will vary from one financial institution to the next and is sometimes dependent upon the term you choose. Some institutions will accept an initial deposit as low as $50 for a certificate. Others will require an opening balance of $100,000. In general, the more money you invest in a certificate, the higher the rate at which it will earn. At Cooperative Teachers Credit Union, you can open a certificate with as little as $1,000 at an Annual Percentage Yield (APY) of 4.75% as of 03/08/2023 (visit https://coopteachers.com/accounts/term-share for current rates and terms).
Certificate term lengths also vary greatly among financial institutions, with most offering a choice of certificates that run from three months to five years. Typically, certificates with longer maturity terms will earn a higher rate. At Cooperative Teachers Credit Union, we offer our members certificates that can be opened for just 6 months or as long as 5 years. To hear more about our certificate terms and rates, speak to a Cooperative Teachers Credit Union representative today.
Is a savings certificate for everyone?
While keeping your savings in a certificate can be an excellent way to diversify your savings portfolio, it is not for everyone. Before you go this route, ask yourself these important questions:
- Do I have an emergency fund set aside to help me get through unexpected events or circumstances?
- Do I anticipate needing to access these funds during the life of the certificate?
Only go ahead with your decision to open a share certificate if you are fairly certain you will not need to access these funds before the maturity date.
What are the advantages of diversifying your savings through a share certificate?
Here are some of the most popular reasons people choose to open a certificate:
- Low risk. While nearly every investment carries some sort of risk, your money is always safe in a certificate. With each Cooperative Teachers Credit Union certificate insured by the National Credit Union Administration up to $250,000, you can rest easy knowing your money is secure.
- Higher dividend rates. Certificates offer all the security of savings accounts, but with higher yields. It’s more for your money, just for choosing to keep it in a certificate for the term.
- Locked-in rates. You’ll never stress over fluctuating national interest rates with a certificate. The APY is set when you open the account and is locked in until its maturity date. Instead of playing guessing games, you can determine exactly how much your money will earn over the life of the certificate the day you open it.
If a certificate sounds like the perfect choice for you, stop by Cooperative Teachers Credit Union today to learn more. We’re committed to giving your money its best chance at growth.