Financial Independence for College Students
College students are at an exciting time in their lives, at the crossroads of independence and responsibility. A small investment in a CD is a great start to their financial planning and budgeting success.
Understanding Certificates of Deposit (CDs)
CDs (Certificates of Deposit) are a type of savings account that hold money for a fixed period of time and offer interest in return, typically paying higher interest rates than other types of savings accounts. Though sometimes used for bigger investments, CDs that are available with a minimum deposit of $1,000 are ideal for college students looking to grow their savings in a secure and steady way.
CD Laddering: Strategic Saving for Students
CDs offer effective financial management assistance for people in their late teens and early twenties. Students who work summer jobs can allocate their savings throughout the year by investing in 3-, 6- and 9-month CDs, gaining access to the money at the start of each quarter. This is called CD laddering. Not only is the money tied up to avoid impulse purchases or going over budget, but it will also earn interest. The interest can be used to purchase textbooks, pay for summer trips, or act as a rainy-day fund.
Choosing the Right Financial Institution
Opening a CD in college can also be a first step towards financial independence. Many high school students open their first checking account at their parents’ bank or credit union, but once students reach college they often look for more financial independence as their priorities change. The best CD rates are often at smaller banks and credit unions, so consider looking for CD rates at local financial institutions rather than your primary bank if it is one of the big national brands.
Low-Risk Investment with Guaranteed Returns
Students opening CDs also face less risk than other investment strategies. CDs are generally protected by the federal government – in fact the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) provide insurance on deposits up to $250,000 per depositor, per institution, per account category. As long as the account holder doesn’t access funds before the maturity date, they are guaranteed their initial investment as well as the earned interest up to the insurance limits. CDs can offer higher interest rates than other savings accounts without the risk of the stock market, where their initial investment can decline in value.
Financial Management Benefits for Students
CDs are an effective and reliable way to grow savings and practice financial management and independence for college students. The fixed term and early withdrawal penalty provide students with budget control and oversight, while the fixed interest rate and FDIC or NCUA insurance allow for a low-risk, high-reward savings option. College students should review their financial situation when considering a CD as part of their financial planning, as well as any requirements and restrictions from the Financial Institution.
How CD Valet Helps College Students
CD Valet is designed to find CDs with the best rates and terms nationwide and supply students with the footing for knowledgeable and profitable financial independence, an important yet sometimes overwhelming aspect of adulthood. Providing students with extra cash and parents with peace of mind, CD Valet is a great tool to develop the next generation of savvy savers.
