Financial Fundamentals Blog

Unlocking the Power of Financial Growth: A Comprehensive Guide To Certificates

young man researching certificate rates online


Let’s say you’re saving money toward a goal. Maybe that goal is retirement; perhaps it’s a new house; or maybe you’re planning on taking yourself on a well-deserved vacation. 


No matter what your goal is, one thing is true: You need somewhere to keep your money as you save it. While keeping cash under your mattress may seem to have merit, there’s another option on the table. A certificate can be a great way to keep your money safe and earn a little additional money through interest at the same time.


What is a Credit Union Certificate?

A certificate is a specific type of savings product. It comes with a fixed interest rate and maturity date and requires a minimum amount of deposit.


In other words: When you open a certificate with a financial institution, you give them an amount of money (over a minimum threshold) and agree not to take it out for a specified amount of time. In return, you get extra money (interest).


This is a little different from typical savings accounts. When compared to other savings products, certificates offer:

  • Fixed (often higher) interest rates.
  • Predictable returns.
  • FDIC insurance up to the maximum allowed.
  • Lower market risk and a relatively safe investment option.
  • A range of term options to help you meet different financial goals.

However, there are trade-offs. While savings accounts allow for easy withdrawals, certificates may penalize you if you take money out before the stated term. And whereas checking and savings accounts don’t usually have required minimum deposits, certificates may.


What To Consider Before Opening a Certificate

So far, so good. You might be thinking to yourself that a certificate is in your future.


And that may be a great call—but there are a few things you should consider, first.


What’s the Process for Opening a Certificate?

The process for opening a certificate is similar to any other standard checking or savings account.


The difference? What you’re agreeing to when you open the account. Just like when you open a checking or savings account, you want to do some research to make sure the certificate and credit union or bank is right for you.


Some factors to think about when opening your certificate include:

  • Interest Rates and APY: Competitive interest rates and annual percentage yields (APY) can help you maximize your earnings — look for higher ones, when possible.
  • Term Length: Longer terms can mean higher interest rates, but you'll be committing to locking up your funds for a longer time. Consider your financial goals — and whether you’ll need liquid funds — before committing.
  • Principal: Make sure you understand the minimum deposit requirements to open a certificate. This threshold will probably vary from institution to institution.
  • Early Withdrawal Penalties: While you may be able to take your funds out early, there will likely be penalties involved. These penalties can impact the amount of interest you earn!
  • Reinvestment Options: If you're considering letting your certificate automatically renew when its term is up, read the fine print to understand the terms of reinvestment — including whether its interest rate will change.

Here’s the Bottom Line: You Should Consider a Certificate If ... 

A certificate might be a great choice for you if you’re looking for a secure, fixed-return investment without having to experience the roller coaster ride of the stock market.


This is especially true if you’re saving up for a significant future expense where you won’t need the funds until a specific date. In this case, certificates give you a disciplined way to save by removing the temptation to dip into funds while also providing the benefit of growth through interest.


For example, a certificate might fit very nicely in your financial plan if ... 

  • You’re a future homeowner. Saving for a down payment? Lock away a strategic portion of your savings in a certificate to grow until you’re ready to buy.
  • You’re planning for retirement. Certificates can be a great way to diversify your portfolio and supplement your retirement savings.
  • You’re building an education fund. A long-term certificate can secure your child’s college money for later.
  • You’re saving up for a vacation. Use a short-to-medium-term certificate to put money for tickets and accommodations aside. This will help your money grow safely until you're ready to plan your itinerary and set sail.

Fuel Your Financial Plans with 7 17 Certificates 

Certificates offer you a good balance of safety, predictable returns and higher interest rates—which can make them a wise choice for specific financial goals and timelines. Whether you're planning for retirement, a major purchase or simply want to grow your savings securely, consider making a certificate a cornerstone of your financial strategy!


Ready to take the next step? Explore your options and find the right savings product to fit your financial plan today. Check out more details and learn how to get started right here.