How CDs can benefit your financial planning

The economy might be doing a little better, but many families are taking a conservative approach to investing money. And planning for the future - retirement, educational expenses, a new car or house or maybe a long-anticipated vacation - requires careful strategy to make sure you have the money you need, when you need it.

When looking for ways to conservatively invest your money, make sure you investigate purchasing a certificate of deposit, or CD. This long-term investment typically has better interest rates than savings accounts, but requires you to keep your money invested for a specified amount of time.

Some reasons you might want to invest your money in CDs include:

* Security - You will receive your investment back, plus the earned interest without any financial risk.

* Higher interest rates - CD rates tend to offer higher interest rates than savings accounts. And the longer the term of the CD, the better the rates should be. For example, investing in a one-year CD will probably give you higher interest earnings than investing in a six-month CD.

* The ability to reinvest - As your CD earns interest, you have the option of either reinvesting the interest into the current CD's principle, rolling it over into a new CD, or using the money for a different investment program.

* Plenty of opportunity to shop around for the best rate - Banks and credit unions all offer CDs with varying rates. When you shop around, you will be able to find the best interest rate. And every time your CD comes due, you can take another look, just to make sure you're getting the best value for your money.

* A great future planning tool - If you have long-term plans, investing in CDs work well because you can determine when you want to have the money (and interest) available, and you will know exactly how much money will be available at that time. This might help if you know that you want to start retirement in two years, or plan to take a vacation in six months, for example.

VisualEconomics.com is a great information site to help you determine the best financial plans for your family and the future. It has information about certificates of deposit, as well as articles, diagrams, charts and graphics on everything ranging from interest rates to stretching your family's dollar. The site also can connect you to institutions offering you the best CD rates.

Courtesy of ARAcontent