While stuffing a piggy bank may have been the savings method of choice in your younger years, you don’t have to be a financial expert to know this strategy should be left behind in childhood. As a busy individual with complex financial needs, you deserve a better alternative to simply holding on to cash. Here, we will share how depositing funds to earn interest rewards you with earning power, security, and a better path to reaching your goals.
Depositing funds to earn interest can help you reach various financial goals – from saving for a vehicle or a down payment on a home, to building wealth and preparing for a comfortable retirement. You can reach your financial goals faster by earning interest on your money. The higher the interest rate and the more often interest is compounded, the faster your money will grow.
When looking for a savings account, it’s essential to:
- Identify the interest rate and how often interest is compounded.
- Choose the type of liquidity that’s right for you. Whether you can leave the funds untouched for an extended term or need occasional access to savings can help you determine the best type of savings account.
- Partner with a local credit union for expert guidance in reaching your savings goals.
When you deposit funds into the right kind of credit union account, you can earn deposit interest on all or a portion of your account balance. This deposit interest, also called a yield, is the rate the credit union pays on your deposit money.
How much interest you earn on an account balance over time varies with several factors, including the rate itself, how much additional cash you deposit, and how often interest is compounded. With compounding, your earned interest is deposited into your account, which also starts earning interest itself. Some accounts feature interest compounding daily, monthly, quarterly, or annually.
To see how these factors work in the real world, let’s look at share certificates as an example. A share certificate is a deposit account that earns interest over a fixed time frame of your choosing, typically called a “term”. Share certificate terms typically range from a few months to a few years. Share certificates typically offer a higher rate of interest than a regular savings account. In exchange for the higher rates they pay, and unlike traditional savings accounts, share certificates require the account holder to keep the funds on deposit for the entire term to earn the total interest or avoid a possible early withdrawal penalty. At UCU, interest in a share certificate is compounded daily to help you maximize earnings.
When your funds are deposited at your credit union, you also enjoy greater peace of mind. For example, at UCU, all balances up to $250,000 per account are insured through the National Credit Union Administration (NCUA), the strongest federal funds insurance available. We also protect an additional $250,000 in account balances through Excess Share Insurance (ESI) for total protection of up to $500,000 per account. That’s protection that certainly no piggy bank can offer!
We’re Here for U
At UCU, we are here for U and offer many solutions to help you build financial security and grow your savings. Contact us today to get started in finding the right solution for you and your goals.
You can also set up a meeting with one of our Certified Credit Union Financial Counselors. They are here to help answer your questions and there is no obligation.