Howdy Wall St. Willy! I heard that interest rates in CDs are low lately. But what is a CD anyway?
Well, a CD is a Certificate of Deposit. It is a place where you keep your money to get interest from the bank that you kept it in for the amount of money that you kept.
The interest rate is decided before you keep your money in and you keep it there for a certain amount of time. After that you get your money that your kept in it plus the interest.
And, can I withdraw my money early?
Yes, you can withdraw your money early, before the term of the CD or how long you’re supposed to keep it for.
But you’ll face a penalty and you might also not get any of the interest that you had accumulated. So, try not to invest in a CD or Certificate of Deposit if you think that you might need to withdraw your money early.
And, does the price of the CD go up and down like a stock or a bond?
No, it does not because it is not actively traded on the market.
But then why should I invest in a CD?
Well, you should invest in a CD because it is a good short-term and mid-term investment where you have no risk of losing your money but where you can earn some interest.
You are guaranteed to get your money back plus interest if you keep your money in the CD for the agreed upon amount of time.
Well, thank you very much for explaining that. Now it’s a lot simpler.
You are welcome, Sooper Cooper. Remember, Finance is Your Friend!
Podcast: What is a Certificate of Deposit or CD?
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Everything you need to know about a bank Certificate of Deposit or CD: What is a Certificate of Deposit, how a Certificate of Deposit works, can the money in CD be withdrawn early, does the price of a Certificate of Deposit change, why should you invest in a Certificate of Deposit or CD, and more.
Show notes and transcript at: https://easypeasyfinance.com/what-is-a-certificate-of-deposit-or-cd/