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Everything You Need to Know About Certificate Accounts


If you hear the term Certificate account and are unsure of what that means, don’t worry, you are not alone! Certificate accounts are investment tools utilized by those who want to maximize earnings on their extra funds. Rather than letting your money sit in a low-interest savings account, put your money to work for you in a customizable certificate account and watch your earnings soar!

What is a Certificate Account?

Certificate accounts function similarly to savings accounts; however, they generally have higher interest rates - which means more money for you. Unlike savings accounts, certificates have set lifespans; the funds you deposit into a certificate account will not be accessible until the end of the term you selected when opening your account. Typically, terms range from 3 months and can be as long as 5 years. In general, the longer you opt to leave your money in a certificate account, the higher the interest rate of return!

Who should use Certificate Account?

If you have some extra funds lying around, investing in a certificate account is something you should consider. Like a mutual fund, certificate accounts are a safe, risk-free investment strategy that will help your money accelerate over a predetermined period. Dividends are compounded daily and credited to the account monthly, so you can visibly watch your savings rise. If you are interested in making your money work for you but not interested in making risky investments, a certificate account could be perfect for you.

Is there a way to keep my funds liquid?

While your money is inaccessible for the period of time that it is invested in a certificate account, there is a way to keep funds liquid: certificate laddering. Through this process, you’ll divide your money among several certificates of differing expiration dates. When one ends, you choose to either withdraw the funds or reinvest them into a new certificate account.

For example, you may have certificate accounts that mature at six months, 12 months, 18 months, and 36 months. Once the six-month certificate matures, your funds will be released. At that point, you can decide whether you would like to withdraw the cash or whether you want to reinvest in a new certificate of a term that works best for your finances.

Aside from keeping funds liquid, one other benefit to certificate laddering is that you’ll be able to take advantage of the market if higher interest rates become available, thereby allowing your money to grow further!

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