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Bank Savings
- FDIC Insurance
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Savings Accounts
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Money Market Accounts
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Money Market Mutual Funds
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Certificates of Deposit (Time
Deposits)
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Holiday Savings Clubs
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Vacation Savings Clubs
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Treasury Savings Bonds
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Certificates of Deposit (Time Deposits)
CD’s are a low risk debt
instrument offered by financial institutions. CD’s have a stated maturity
date and offer a higher rate of return then a regular savings account.
Normally, the longer the maturity, the higher the interest rate paid. Banks
are not required by law to permit early withdrawals. The price of CD’s
fluctuates with market rates, and, if permitted, one is subject to penalties
for early withdraws, as well as gains or losses on market price swings.
(Early withdrawals without penalties may be allowed in special
circumstances, such as death or incapacitation.) Normally, the FDIC insures
the account up to $100,000. Interest is subject to federal and state income
taxes. Additionally, CD rates may be fixed or variable; CD’s also may
contain call provisions.
When purchasing a CD,
always double check and confirm with the sales representative the maturity
date, rate, early withdrawal penalties and call features, if any. If you
have multiple CD’s, check the issuers to ensure that you stay within the
$100,000 FDIC insurance limits per institution. Additionally, ascertain if
the account rolls over automatically and allows a grace period for
withdrawal of money without penalty. Lastly, confirm how interest is paid to
you.
Young adults need to
plan their cash needs very carefully. Breaking a CD can be expensive, if
permitted. Matching the maturity dates with one’s cash requirements is
important.
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