Why you should open a CD for your child now

As a parent, you want your child to have every comfort in life, including financial security. One way to provide that security is to teach them the value of saving money. But savings need not be limited to traditional savings accounts or piggy banks.

Although it may not be the first thing that comes to mind, a Certificate of Deposit (CD) Can be a great way to introduce your child to savings. It offers many of the same benefits Savings Account Do, but with some added benefits that make it the perfect first savings product.

Explore CD options here to start saving – and earning – more money for your child

Why you should open a CD for your child now

Your child can benefit from submitting a certificate in several ways. Specifically:

They will earn guaranteed returns

When you open a CD, you agree to leave your money in the account for a set period of time, known as duration, in exchange for a guaranteed interest rate. As long as you keep the money in the account for the entire term, it will earn this rate regardless of whether the stock market crashes, the economy goes into recession or some other adverse financial situation occurs.

See how much your child could earn by looking at today’s CD rates here.

They will enjoy high interest rates

Like savings accounts, CDs earn compound interest. This means the interest you earn is reinvested back into the account, earning interest on top of interest. Over time, this can significantly increase the value of your child’s savings.

CD earns more interest rate Compared to regular savings accounts – often even more High-yield accounts. The longer the term of the CD, the higher the interest rate. Plus, if you open a CD when the rate is high — as They are now – Regardless of whether the rate is lower in the future, you lock in that rate for the entire term.

Their money will be safe

CDs are FDIC-insured up to $250,000 per bank account (or NCUA-insured for the same amount for credit unions). That means your child’s money if the institution fails safe. The only way you can “lose” money on a CD is if you withdraw the funds before the end of the term, in which case you’ll be charged a penalty that will be deducted from your balance.

And speaking of keeping their money safe, this punishment can help discourage you and your child from using their savings for anything other than the intended purpose. A piggy bank is easy to crack and you can withdraw money from a savings account at any time. A CD with an early withdrawal penalty makes you think twice before touching certain funds

Find the best CD for your child by comparing current rates online now.

They will learn to save

It is important to instill good financial habits in your child at an early age. Putting a portion of their allowance or birthday money into a CD gives them first-hand experience with a real financial product and shows them how to manage their money responsibly. This is an essential life lesson that will stay with them for years to come.

Bottom line

Opening a CD for your child now can set them up for a lifetime of financial success. And it’s easy to do.

Many banks offer Custodial Account, which is set up and managed by an adult until the child turns 18, at which point they take ownership. You can visit a branch in person or apply online by providing some basic information about yourself and your child. Be sure to involve your child in the process so that they feel motivated to invest and save more.

With guaranteed returns, high interest rates and low risk, a certificate of deposit can be a great way to get your child into the habit of saving. So why wait? Start exploring your options and give your child the gift of financial stability today.