Article | January 18, 2024

Is a Term Certificate Account Right for You?

Budget & Save

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When you’re planning for the future, money matters.

Choosing the right type of savings account can be overwhelming. With so many options available, finding the right one for your situation and goals can be challenging.

We talk often in our financial wellness programs about setting savings goals, and how different types of savings accounts can help you plan for the future. It can be particularly helpful to set SMART goals – goals that are Specific, Measurable, Achievable, Relevant, and Time-Bound. When you are working to grow your savings, setting SMART goals can help you determine what will best support your efforts and maximize your savings success.

In this blog, we’ll cover Term Savings Certificates in a fun and easy way, so you can make an informed decision.

What is a Term Certificate? 

A Term Certificate, sometimes referred to as a Term Savings Certificate, is a specific type of savings account. 

A Certificate can be a smart, low-risk investment option because it provides a guaranteed return and it is federally insured by NCUA. Your return will be determined based on four variables: rate, term, initial deposit, and withdrawal terms. 

  • Rate: The top benefit of a Certificate is higher earning potential. In exchange for agreeing to keep your money in the Certificate account for a specified period of time, you’ll receive a higher dividend rate than you might receive on a regular savings account. 
  • Term: Opening a Certificate requires you to commit to setting aside funds for specific length of time. At Golden 1, this time frame can be as short as three months or as long as 60 months. 
  • Initial Deposit: Certificates may require a higher minimum balance to open a Certificate account. 
  • Withdrawal Terms: If you need to take money out of your account before its term expires, you’ll pay a small penalty. 

When is a Certificate a Good Option? 

Certificates can be a valuable savings option if you’re seeking to earn money on your savings without taking on too much risk.

Certificates are:

  • Low risk: Stocks and other investments options can experience more volatility. Certificates are a lower risk option because they don’t lose value and they are federally insured by NCUA.
  • Higher earning: Certificates offer higher dividend rates. If you can plan ahead and keep that money invested for a set period of time, you’ll safely and conveniently earn more. It’s also important to note that Certificates may offer less flexibility than a savings account because of this potential for higher earning.
  • Predictable: Unlike some higher-risk investment options, Certificates offer solid, predictable returns. When you open your account, you can calculate exactly what you should earn during the Certificate’s term as long as you keep the money invested during the entire time.
  • Good for saving toward a goal: Because you put money away for a set amount of time, a Certificate can be a good option if you’re saving for a specific goal like a wedding, a vacation, or a special project.
  • A solid diversification option: If you have money in other higher-risk investments, a Certificate can give you a lower-risk option to counterbalance other portfolio items and ensure a steady return.

Is a Certificate Right for Me? 

Many people maintain both a Savings account and Certificate account(s), using their savings account to save for short-term goals and a Certificate to put away money for long-term plans. To determine if a certificate is right for you, consider your goals and what you hope to achieve with your funds.

  • Special event planning: If you’re planning ahead for a special event like a wedding or a vacation, a Certificate keeps your money safe and provides higher earnings until the big day arrives.
  • Saving for a down payment: If you are making a long-term plan to buy a home or car, a Certificate can help your funds grow faster.

You’ve already managed the hardest part of the process – resolving to save and preparing to reach your long-term financial goals. From here, you have several safe and secure savings options to choose from. 

And, no matter what Certificate you choose, your money is safe and sound with Golden 1. We’ve been protecting members and their finances for 90 years, and our members’ deposits are also federally insured by NCUA

You can open your new Certificate account through the Mobile App or Online Banking. You can also make an appointment at a branch location or call our contact center to talk with a member service representative about the best option for you. If you are not yet a member of Golden 1, we can also help you establish your membership so you can start enjoying the benefits of your new account.