7 Smart Reasons to save Money with a Certificate of Deposit ...

Unlike the stock market, a certificate of deposit is a safe investment strategy. With these time deposits, you leave your money in the bank for a certain length of time. There is zero risk, and at the end of your term, the bank returns your investment plus interest.

Because certificate of deposits are time deposits, you're unable to touch your money for the duration of your term. This is an excellent tool if you're saving long-term, perhaps for retirement, your kid’s education or a house. It’s similar to a regular savings account, but you can’t dip into your account whenever you please. Taking money from a certificate of deposit early will result in a hefty penalty.

Savings account rates vary depending on the bank, but typically you’ll earn less than .10% APY. This is a different story with a certificate of deposit. Although interest rates also vary depending on the balance in your CD, you can realistically earn as high as 1.00% APY, based on your term and deposit.

Just like your checking account and your savings account, all funds deposited into your certificate of deposit are FDIC insured up to $250,000. This provides peace of mind. If the bank fails and cannot reimburse your deposit, your funds are protected and you're guaranteed the return of your investment.

Certificate of deposits are not only useful for long-term savings, but also short-term savings. For that matter, certificate of deposits feature flexible terms, ranging from seven days to 10 years, depending on the bank. Talk with your bank to discuss your needs and determine the option that’s right for meeting your goals.

The opening deposit for certificate of deposits vary based on the bank or credit union. Some financial institutions require a minimum deposit of $1,000. However, there are several other banks that only require an opening deposit of $500 or $100 (or less). Shop around and compare terms with online and offline banks.

It doesn't take a lot of time — or effort — to set up a certificate of deposit, especially if you’re opening an account with an online bank, which typically offers the highest interest rates. To set up your account, simply complete an application. Next, link your certificate of deposit with an external bank account, and then fund your new account.

As one of the safest investment strategies, opening a certificate of deposit offers an additional way to save your money, and an opportunity to earn an impressive interest rate. Do you have a CD with a bank or credit union? What are your long-term saving goals?