Pinnacle offices in the National Capital region are closed today due to inclement weather. All office and weather updates will be posted to PNFP.com/Weather.
Pinnacle offices in the National Capital region are closed today due to inclement weather. All office and weather updates will be posted to PNFP.com/Weather.
Everyone faces the same dilemma with their savings. We want our money to grow, but we worry about risk. We want to protect our nest egg, but don’t want to miss out on a higher rate of return.
Finding that perfect balance of growth and security can be stressful, especially when the stock market is volatile. Thankfully, there’s an old standby savings strategy that can give you both, if you set it up properly
Maybe it’s been a while since you considered a CD, so let’s look at four big questions I often hear.
Why go with a CD?
From the day you open it, you know exactly what to expect from a CD. As long as you don’t make any early withdrawals, you’ll get the entire original investment back, plus a guaranteed interest rate. No matter what happens in the market, you know exactly how much you’ll have at the end. If predictability is important to you, CDs offer it.
How do I keep some cash available?
That’s the sticking point for a lot of people. CD terms typically range from one to five years, so people looking for liquidity often pass them by. But they shouldn’t. By using a technique called “laddering,” you can establish a regular pattern of maturity that makes your cash available for use or reinvestment. Laddering keeps your CDs flexible but also predictable.
It works this way:
How much should I start with?
The answer is different for every person. If you start small, your returns will be smaller, too. If you go larger, you’ll get more in the long run. Is the higher rate of return worth locking the money away for one to five years? That’s up to you. Laddering could be a good option if you’re worried about liquidity for larger amounts.
Uncertainty over terms and liquidity shouldn’t be a barrier to smart saving. You can have flexibility, higher rates of return and security all in one package. All it takes is a conversation with your financial advisor about your needs and appetite for security vs. growth.
Cheryl Plummer is the office leader for Pinnacle’s Green Hills office in Nashville, TN. She can be reached by email at Cheryl.Plummer@pnfp.com or by phone at 615-743-3517.
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