While the economy has been a source of doom and gloom over the last year, if you have cash to manage, certificates of deposit (aka CD’s), are still a sound and safe way to manage your money. My grandmother used to keep her cash in the cookie jar on the top shelf, while grandpa thought under the mattress was the best place to save his coins. Today’s banks don’t seem to offer much more return than grandma’s cookie jar for savings and checking accounts. And even though CD rates have gone down slightly in the first week of November, they still offer a greater return than standard bank accounts and a safer investment for those not willing to take risks in the stock market.
Investing your cash in CD’s with staggering maturity dates, helps avoid penalties for early withdrawal in case of any financial crisis and the need to get access to your cash right away. Obviously, the longer the maturity dates on your certificates of deposit, the higher the yield of return on your investment. But for cautious investment it is wise to consider purchasing a 90 day Certificate of Deposit the first month you have extra cash at hand, and then a 12 month CD, and then even a 24 month CD. By staggering your maturity dates you insure available liquidity and the option to take your money and invest it in other financial arenas as you see what the economy and the markets are doing. Hope is high that the recession is over, but interest rates are still low and it looks like steps will be made to insure they stay low. Eventually interest rates will have to rise, and the smart investor will be able to be flexible in this fluctuating economy.
Financial planners suggest keeping a six month cushion of cash available for living expenses should the need or necessity arise. Emergencies happen, and job security is not a given as unemployment rises to the double digits. Even if you have no career concerns, it is always best to keep some cash liquid and available, whether it is under the mattress, in the cookie jar, or in a FDIC insured savings or checking account. But after that, Certificates of Deposit, especially those that are staggered in their maturity dates, are a safe and sound way to practice cash management and investment in today’s market.
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