Bonds vs CDs vs Savings

How to choose between: BONDS vs CDs vs SAVINGS ACCOUNTS Remember: Always consult a financial advisor before making investment decisions! This chart just outlines some basic guidelines. Do you need ready access to your money? Yes. Yes, but not in the next year. No, not for the foreseeable future. How much money do you plan to invest? Less than $250,000. $250,000 or more. Which is more important to you? Higher return on investment. Lower risk. GET A SAVINGS ACCOUNT A savings account is one of the only ways to generate a little bit of interest and still have GET A GET A access to withdrawing your money whenever you need. 1-Yr CD BOND* GET A A Certificate of Deposit will get you better interest rates than a savings account, but it locks your money up for a set period of time. The longer the time, the more interest it pays. Pros: Insured by the FDIC. Low account minimums. 5+Yr CD' Bonds are backed in full by the U.S. government. Generally they are long-term and have hefty penalties for early withdrawals, but they are relatively secure and safe. Easy access to funds. A longer-term CD will yeild higher interest rates than most bonds and savings accounts; however, CDs generally aren't a good option for institutional investors or those with upwards of $250k to invest. Cons: Interest rates are obscenely low. Pros: Insured by the FDIC. Higher interest rates than savings accounts. Pros: Government backed. Good long-term interest. Secure for large Cons: Your money is off-limits investments. Pros: Insured by the FDIC. Higher interest rates. Easy to shop around for the best rates. unless you want to pay a penalty. Cons: Your money is off-limits unless you want to pay a penalty. Some bonds, especially municipal bonds, yeild Cons: Your money is off-limits unless you want to pay a penalty. Not backed by the lower interest than CDs. government after $250k. *Bond and CD rates frequently fluctuate. As of Sept. 2010 5-year CDs yeild higher rates than 5-year bonds, on average. Sources: BankRate, Teenvestor, The Motley Fool visualeconomics.com How to choose between: BONDS vs CDs vs SAVINGS ACCOUNTS Remember: Always consult a financial advisor before making investment decisions! This chart just outlines some basic guidelines. Do you need ready access to your money? Yes. Yes, but not in the next year. No, not for the foreseeable future. How much money do you plan to invest? Less than $250,000. $250,000 or more. Which is more important to you? Higher return on investment. Lower risk. GET A SAVINGS ACCOUNT A savings account is one of the only ways to generate a little bit of interest and still have GET A GET A access to withdrawing your money whenever you need. 1-Yr CD BOND* GET A A Certificate of Deposit will get you better interest rates than a savings account, but it locks your money up for a set period of time. The longer the time, the more interest it pays. Pros: Insured by the FDIC. Low account minimums. 5+Yr CD' Bonds are backed in full by the U.S. government. Generally they are long-term and have hefty penalties for early withdrawals, but they are relatively secure and safe. Easy access to funds. A longer-term CD will yeild higher interest rates than most bonds and savings accounts; however, CDs generally aren't a good option for institutional investors or those with upwards of $250k to invest. Cons: Interest rates are obscenely low. Pros: Insured by the FDIC. Higher interest rates than savings accounts. Pros: Government backed. Good long-term interest. Secure for large Cons: Your money is off-limits investments. Pros: Insured by the FDIC. Higher interest rates. Easy to shop around for the best rates. unless you want to pay a penalty. Cons: Your money is off-limits unless you want to pay a penalty. Some bonds, especially municipal bonds, yeild Cons: Your money is off-limits unless you want to pay a penalty. Not backed by the lower interest than CDs. government after $250k. *Bond and CD rates frequently fluctuate. As of Sept. 2010 5-year CDs yeild higher rates than 5-year bonds, on average. Sources: BankRate, Teenvestor, The Motley Fool visualeconomics.com