Military families can face unique financial obstacles that come with frequent moves, uncertain timelines, and fluctuating financial needs. It is often difficult to know where and how to save, but Certificates of Deposit (CDs) are a secure, low-risk savings option that can provide stability between deployments and transitions.
We interviewed Kate Horrell, AFC, ChFC MQFP, a military family personal finance expert, to get her insights on how CDs fit into saving and retirement planning for military families. Kate is the author of College Finances for Military Families: Including Post-9/11 GI Bill® Benefits
How do CDs support military family moves?
CDs align well with the saving needs that come with being in the military, as well as supporting a family. As Kate explains, “Military families may be more likely to find themselves in situations where they have a small chunk of cash that won’t be used for a few years.” This can happen after selling a home or receiving a lump sum benefit. Instead of allocating that money into low-interest savings accounts or high-risk markets, “CDs are a logical place to keep that money safe while still earning some interest on it.” With clear terms and guaranteed interest, CDs are a dependable choice for money you don’t need right away.
Beyond general savings, CDs can support military specific goals like a permanent change of station (PCS) move or other career transitions. “A military family may have a PCS savings account to help pay for the costs of moving every few years,” says Kate, making a time-driven savings tool like a CD ideal.
What role can CDs play in planning the transition from military life?
Additionally, families are encouraged to build a transition fund for the move out of military life and into civilian life, as finances and lifestyle choices change. Kate adds that since “you can’t always time your separation from the military to the market,” this should be protected from market fluctuation, which CDs provide as their interest payments are predictable.
What are the benefits of CDs for military families?
CDs are one of many savings and investment tools, and they stand out for their safety and predictability. As long as your funds remain deposited for the full term, CDs have guaranteed interest, and if timed in accordance with lifestyle transitions, can provide extra cash to help ease the adjustment period. With a CD laddering strategy, you can take advantage of potentially higher interest rates offered by longer-term CDs while still maintaining access to your funds at regular intervals as the shorter-term CDs mature.
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