HELP! I Want My Money to Bear Fruits

There has been a buzz in the stock market that America’s economy is on the verge of a slow recovery as what was predicted by economy analysts for the year 2010. This year is said to be a good time for those who have invested on CD’s (certificate of deposits) and for those who are fervently praying for a climate change in CD rates. Hopefuls may expect banks rates to be a bit higher as a result of this economy recovery we are talking about.

If you are one of those hopefuls, then you better get a grip of what a Certificate of Deposit actually means. To invest in CD is like lending money to a bank for a period of time with a fixed interest. The longer you lend, the higher the accumulated interests will be. A CD is great if you have plans of saving for example, for the future of your kids (college, books and others). This is because, aside from the fact that you have time deposited money (you are not allowed to have a withdrawal of the said cash unless you want to face a case of breach of contract), it grows while it earns interests through time.

 Time is such a big factor in Certificate of Deposits. It is the determining factor on how much your money will earn. Here is a sample list of CD rates to show how time affects your deposited money:

Sample Rates for Certificate of deposit (CD)

• Depositing within a 6-month period  – principal amount +1.15%
• Depositing within a 1-year period – principal amount +1.43%
• Depositing within a 2-year period – principal amount + 1.78%

NOTE: percentages continue to increase as the lock-in period of the principal amount becomes longer.

Keep in mind that the rates of CD which are presented above are not a permanent thing. Just like the FOREX rates and the stock market, changes in these rates are expected as there are a lot of factors (present state of the economy, for example) that affects it. So it is a good advice that since you are investing money, you should first search whoever has the best offer and the highest rate possible. This is a smart move especially when you plan to invest a large amount of money for a long period of time.

The first thing to do is to know what the average CD rate at present is. You can do this online as almost all banks already have their own websites; not to mention the fact that this will save you a lot of unnecessary drives around town. Based on that average rate, you now can have an overview of the interest rate that your money deserves.

On why it is always better to shop for rates is that, for example, during the final months of 2009, FDIC reported that the national average rate was 2.13% for CD’s on a 5-year contract. Whereas, depositors claim to have found on the internet that the average rate is at 3.25% and other banks even offer a higher yield. The difference between these two reported rates has a much greater effect when calculated with a principal amount.

It may take time to search the net and look for the best possible rate available. But remember that what you are investing on is the future of your children or maybe that house of your dreams. If you are careless then, you can be outsmarted by some cunning investors. By being wise with regards to our investments, we are protecting our hard earned money and our future. Yes the economy is facing a difficult time but that does not mean we should just sit around and wait for our money to bear fruits.