Saving 101: The Trusty Share Certificate
Wednesday, January 16, 2019
The share certificate isn’t as popular with young audiences as it is with Baby Boomers, and many young people have no idea what a certificate even is, much less whether they might benefit from one. Which is a shame, because this tried-but-true savings vehicle is one of the tools that anyone serious about saving for the future should consider, at any age. The truth is, for anyone looking to build their long-term savings, a share certificate is a simple investment that pairs safety with high dividends.
Share Certificate Basics
Share certificates are like a savings account but better. They offer higher dividend rates than a savings, checking or money market account. In exchange, you agree to leave your money in the account for a specified length of time—typically ranging from a month to seven years. The Annual Percentage Yield (APY) remains the same for the entire term, unlike “variable rate” accounts like checking and savings. When the term ends, you have the choice to withdraw your original deposit or invest it into another certificate. With Signal’s newly enhanced share certificates, you can extend your term by six months or more at the prevailing rate — allowing your money to grow, even more.
Some institutions require a minimum amount to open a certificate, though in most cases it isn’t astronomical. Typically penalties are assessed if a withdrawal is made before the end of the term (more about that below).
Getting a great rate isn’t the only benefit of a share certificate. Because share certificates from federally insured credit unions are insured by the National Credit Union Administration (NCUA), they are a safe and secure investment. Another great aspect is the share certificate’s simplicity. Once you deposit the money and choose your term, the account takes care of itself, and dividends can be deposited into your checking account or back into the certificate to earn compounding dividends. As long as you don’t withdraw the funds, you’ll be able to calculate your dividends from the very beginning.
Life can be unpredictable. Anything can happen where you may need access to your money. The money stashed in a share certificate can be withdrawn, but if you withdraw funds before the maturity date, you’ll most likely be charged a penalty. Penalties can vary depending on the institution — at Signal, we offer a one-time penalty free withdrawal option to give our members a little more flexibility1. Make sure you understand the penalty for early withdrawals before opening an account. And to get the best out of a share certificate, avoid cashing out early—unless you really have to.
To sum it up, money may not actually grow on trees, but it might feel like it does when you invest in a share certificate. It’s a great way to save for the future relatively risk-free, so you can reach your financial goals.
Learn more about Signal Financial’s newly enhanced share certificates.
1 Share certificate holds may reduce the amount available for withdrawal. If you elect to apply the option and your withdrawal amount exceeds 50% of the balance, the amount above 50% is subject to an early withdrawal penalty. Withdrawals may reduce earnings.