4 Ways to Use CDs in Planning Your Financial Future

Interest-bearing investments are a wise decision for just about any consumer. If you have money that's sitting in a checking account that doesn't earn any interest, you're missing out on opportunities to increase your savings. Certificates of deposit (CDs) are a low-risk way to help grow savings by depositing a lump sum in an account for a set amount of time, whether three months or several years. There's generally little risk involved, which make them a convenient and effective vehicle for mid-term and long-term financial planning. The longer you save, the more interest you'll earn.

Here are four ways to leverage CDs in planning for your financial future:

1. For education costs

CDs are easy savings products to use in planning because they come with predetermined terms. Vectra Bank, for instance, offers CDs of one, three, six, nine, 12 and 18 months, as well as two, three, four and five years. Parents can use a four-year CD to help save for private secondary school, or to meet the costs of higher education. While there are various education-focused savings accounts available, some may come with limitations. Once the CD has reached maturity, you can do what you want with the money, like pay for tuition, textbooks and other living costs for students.

2. For a wedding

Weddings are often grand affairs — and that fact usually shows up in all the invoices the newlywed couple and their family may receive. If your date is set for a year or two out, it may be a sensible move to place some money in a CD timed to mature when the big day comes around. While it means setting aside funds you can't touch for that time, it also means having a sure source of savings plus accrued interest to meet the budget or any cost overruns.

3. For a savings backstop

One strategy to investing in CDs is laddering them. This approach involves opening up a series of CDs at maturing dates further and further out. So let's say you open CDs of three months, six months and one year: This can help establish savings while still ensuring you have cash available in the short term, as well as allowing you to enjoy the better interest rates that longer-term CDs offer. If you don't need the money when the most recent matures, you can cycle it back into the ladder. Just remember that opening multiple CDs at once may require a larger upfront investment to meet deposit minimums.

4. For a big-ticket purchase

Is your washing machine running alright now, but maybe on its last legs? If you're thinking of replacing appliances like a fridge, washing machine/dryer, oven range or even a television in the future, consider saving for it now by opening a CD. You might not need to get a new installation right now, but if you know that it's coming down the line more likely than not, it's best to prepare. 

CDs can be a versatile savings tool, and shopping around will get you the best rates. Contact your local Vectra Bank representative today to learn more about our CD options.