When it comes to saving money, there are multiple options available to individuals seeking to grow their funds while maintaining financial security. Two of these choices are Certificates of Deposit (CDs) and Companion Savings Accounts. To help you navigate the differences and make an informed decision on which product is best for you, we will compare these two savings options, exploring their features and benefits.
Certificate of Deposit (CD)
Certificates of Deposits are time-based savings products that are offered by financial institutions. Here are a few of the key features and benefits of CDs:
- Fixed Term and Interest Rate: CDs have a fixed term, typically ranging anywhere from 1 month up to several years. During this term, your money earns a fixed interest rate which is typically higher than a traditional savings account product.
- Low Risk: CDs are considered a low-risk investment as they are FDIC-insured (up to the maximum limit allowed), and since the interest rate is fixed, your earnings will not fluctuate.
- Penalty for Early Withdrawal: With a traditional CD, your money is locked in for the agreed-upon term. If you withdraw the funds before the term ends, you may face a penalty, typically in the form of forfeiting a portion of the interest that CD earned.
Companion Savings Account
Companion Savings Accounts are specialized savings products designed to work in tandem with another account you hold at the financial institution. This account is a “companion” to your other bank products, and they offer features that can help enhance your savings goals differently from a CD. Many find that a Companion Savings Account is the ideal choice to help them reach their financial goals.
- Flexibility and Accessibility: Unlike a CD, a Companion Savings Account does not lock up your funds for a period of time. You have access to the funds when you need them. Building up an emergency fund or saving for a future purchase? You can withdraw money from your Companion Savings Account without penalties.
- Competitive Interest Rates: While traditional savings accounts offer minimal interest rates, Companion Savings Accounts typically provide higher yields. This means you can reach your financial goals faster!
- Low Risk: While CDs are considered low-risk investments providing stability, Companion Savings Accounts may offer slightly less predictability due to interest rate fluctuations. However, a Companion Savings Account is still a safe bet in the risk and return area.
Here at Lincoln Savings Bank (LSB), we offer a Companion Savings Account that works in tandem with any existing LSB account or new LSB account you may open. LSB also offers CDs at varying rates and terms.
When choosing a savings product, it is important to consider your personal financial goals, liquidity needs, and risk tolerance. Reach out to one of our experienced bankers today, and we can assist you with determining the best product to help you reach your financial goals.
