Certificates of Deposit (CDs)

Depending on interest rates, certificates of deposit, or CDs, may offer an appealing blend of competitive returns and low risk.

Compared to traditional savings accounts—which prioritize ongoing access to funds over rate of return—CDs operate a bit differently. They offer a highly competitive interest rate but have a set maturity date. That's the future date when you'll get back your investment plus any interest earned.

You choose the term that's right for you—from 6 months to 5 years. During that period, your funds will grow steadily, but you won't be able to access them without penalty. This can be ideal for long-term savings goals.

However, if you're like most people, you probably have multiple goals in sight—from short-term goals, like saving for a vacation, to those that are a few years off, like saving for a down payment on a home.

This is where CD investing strategies may come in handy. CD ladders, barbells and bullets are three ways to maximize your returns, while also giving you a bit more flexibility. But which strategy is right for you?

CD ladders offer the best of both worlds: periodic access to your money, along with long-term growth potential.

Laddering involves opening multiple CDs with different term lengths—say 1, 2 and 3 years. When each CD matures, you can reinvest the money or use it for a major expense—the choice is yours.

Depending on your goals, a CD barbell is another strategy to consider.

This involves splitting an investment into two CDs—one short-term and one long-term. This can be particularly helpful if you want to lock in an attractive long-term rate but still keep a portion of your funds accessible for short-term needs.

And then there's the bullet strategy. This involves investing in multiple CDs at different times but all with the same target maturity date.

The bullet strategy works well for targeted goals—like saving for your wedding. It's also a good fit for those who need to save gradually over time.

All three of these strategies can be powerful ways to save for future goals. Just make sure you choose the right term length to avoid early withdrawal penalties.

If you're unsure which savings vehicle or CD term is right for you, talk to a banker.

They can help you evaluate your personal finances and come up with a plan that fits your unique goals.

To learn more, visit FirstCitizens.com/Certificate-Of-Deposit.