Certificates of Deposit (CDs)
and High-Yield Savings Accounts

High-yield savings accounts are just like a typical savings accounts, except the annual percentage yields (APY) are typically higher than those associated with standard savings accounts.

CD's also offer higher yields than standard savings accounts.

With a CD, you agree to let a bank invest a specific amount of your money however they wish, for a specific amount of time. And here's the catch: you also agree that you won't withdraw any part of your CD during the CD's term. So if you invest in a 12 month CD with an APY of 3%, it's likely that you'd be smacked with a hefty penalty if you tried to withdraw any amount before the CD matures.

Many CD's require a minimum deposit, but not all.

Some banks offer exotic CD products. You may have heard of "Raise Your Rate" or "No Penalty" CD's. Be sure to read all the fine print before signing up for any CD. Mixing money with ignorance is an excellent way to set yourself up for a financial disaster.

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits, including CD's, up to $250,000, just in case your bank goes under. Bank failures are quite common, especially when the economy is not doing well. So, before you invest, make sure the financial institution your dealing with is FDIC-insured.

Credit unions weathered the 2008 financial crisis and Great Recession quite well. If you can join one, it's a great idea to buy a CD with a credit union (a CD at a credit union is called a share certificate.)