Why CD's Are One of the Safest Investments in an Economic Recession

In an uncertain economy, buying CD's (Certificate of Deposit) may be one of the safest investments to make. While they do not yield as much as more uncertain investments, when a person is able to buy CD's, they are able to manage how much money is invested securely and for a given length of time.

Before buying CD's (Certificate of Deposit) be sure to verify the institution selling the CD is FDIC or NCUA insured. If it is a regular bank, it should be FDIC insured and if a credit union, it should be NCUA insured.

Check online to verify CD rates and terms. Usually the higher the deposit (called Jumbo Certificates of Deposit) and the longer the term (usually at least 5 years), the more of a return you can earn. Verify the amount you want to invest and the term you wish to own your CD is acceptable, then act on it. Rates may appear to be a percentage one day then change the next. The sooner you are able to buy CD's the better chance you have of locking in the given rate.

Visit the bank in-person to buy CD's. This is important because some banks and credit unions have special rates or promotions unadvertised online because of their limited-time availability. Some examples of these are short-term investment commitments with a annual percentage yield (CD rate) comparable to a longer-term time span (ex. 18 month special @ 2.75% the same as 36 months @ 2.75%). Many times when buying CD's on special terms, there are minimum deposit requirements and penalties of 3 month's interest forfeited if needing to withdraw the CD.

See if there are special provisions when buying CD's. Some banks and credit unions allow for one-time "step-up" certificates where you can add to the certificate once during its term. This allows the new money to be invested in the CD at the original CD rate. Others allow buying CD's with monthly checking or savings additions to add to the overall amount at the end of the term. These are great for beginning investors, as the minimum deposit can be as small as $100 and monthly savings or checking withdrawals can be as little as $15 per month.

Buy a CD in your child's name whenever possible. This will allow for future savings to offset costs involved with their teen years: buying a car, going to college, paying for braces.