This content is sponsored by PenFed Credit Union, federally insured by NCUA.
Whether you’re planning for retirement, saving for college or saving money for emergency expenses, it’s beneficial to maximize your funds as much as possible. With today’s high APYs, it may be a good time to capitalize on Certificates before rates start to decrease.
With Certificates, you choose the length of your term (usually, several months to a few years) and make a required initial deposit at a locked-in rate. Then your money earns dividends throughout the term, according to the experts at PenFed Credit Union.
With PenFed’s Money Market Certificates, you can expect guaranteed returns and no surprises by locking in a great rate. Available terms range from six months to 7 years, and certificates must be opened with a minimum balance of $1,000.
“When your certificate matures, you can withdraw the principal and dividends or step up your earning potential by laddering your certificate,” say the experts at PenFed Credit Union.
Certificate laddering is a financial strategy, which involves distributing your funds among multiple certificates with different maturity dates.
“This strategy helps you take advantage of high rates while still keeping some of your money accessible in case you need it,” CBS News Money Watch says.
Laddering provides the advantages of risk management and liquidity maintenance, while also offering the potential for higher returns. When each certificate reaches its maturity date, you may either reinvest or withdraw the funds according to your plans and needs.
If you want to renew your Money Market Certificate, you can choose a new term at any time prior to maturity. Other options include receiving a mailed check, transferring funds to another PenFed account, and transferring via ACH.
The funds cannot be withdrawn during the certificate term without paying a penalty.
PenFed Credit Union also offers IRA Certificates. This option also allows you to start saving with balances as low as $1,000. Other benefits include dividends being compounded daily and paid monthly for maximum returns. Additionally, if you need to withdraw the money before you expect, you won’t lose any of the principal.
You can start saving for educational purposes with as little as $500 through PenFed’s Coverdell Education Savings Certificates. Earnings through these certificates are tax-free. *
According to Moneyrates.com, certificates can offer a good return in the long term, but certificate laddering could be more useful for tuition payments.
“This way each component of your [certificate] ladder should be able to earn the best rate it can right up until the money is needed,” Moneyrates.com states.
Keep your savings goal in mind when considering whether to open a certificate account. If you need continual access to your funds, certificates may not be for you. But, if you know you won’t need to tap into your savings in the short term, this may be the right option.
There are a variety of certificates available, so you should consider what your saving goals are when choosing certificates.
[Certificate] investments come in varying terms and [dividend] rates, so you can use them to suit your savings strategy,” Moneywise.com states.
In today’s environment, certificates are a great way to earn high dividends while securing your principal.
“So instead of just being a more lucrative alternative to savings accounts or even high-yield savings accounts, [certificates] are looking more attractive when compared to other kinds of investments, too,” Moneywise reads.
In addition to offering high APYs, certificates are generally a less risky investment option.
“Recognized as some of the safest investment options — that also offer guaranteed returns — certificate accounts, depending on the account ownership type, are included in the $250,000 that is insured by the National Credit Union Administration (NCUA) for credit union members,” PenFed’s experts say.
Read more about Certificates on PenFed Credit Union’s website.PenFed Credit Union is federally insured by NCUA.