Short-Term Gains: Certificate Accounts and Money Market Accounts

In the world of personal finance, sometimes one investment can pay off, and the opportunity for another one is months, maybe more than a year, away.

What to do in the meantime? Traditionally, the stock market is great for long-term investments, but investors expose themselves to volatile ups and downs over the short term. So, do you want to roll the dice when your investment scope is less than two years?

There are a number of interest-bearing, deposit-insured accounts available for your money at financial institutions (credit union accounts in the United States are federally insured up to $250,000 per individual depositor through the National Credit Union Association, or NCUA). These are worry-free places, tried and true, to watch your money grow. Two widely used options are certificate accounts and money market accounts. Both offer higher interest yields than a regular savings account. Here’s a quick look at their features:

  • Money markets are good for anyone who seeks liquidity, or availability of funds, while still earning an interest yield that’s better than a regular savings account. But remember, you must maintain a minimum balance to earn the published interest rate return.
  • Certificate accounts are good for anyone who seeks a better interest yield than a money market account, but doesn’t need the funds to be liquid. A term, or required investment time period, for a certificate account extends for months, if not years, and the money can’t be withdrawn without penalty, until the certificate matures. Yes, penalties do apply if you withdraw the money early.
  • Because of the guaranteed interest rate return, both investments are extremely low risk; in fact, both are federally insured.
  • Amounts vary depending on the financial institution that offers the accounts, but it typically takes $2,000 or more to open a money market and usually from $500 to $1,000 to open a certificate account.

RBFCU members have access to extended features with certificate accounts and money markets accounts. Higher interest yields are available on “tiered” money markets, and holders of certificate accounts can collateralize them to a “Certificate Secured Loan.” Funds in certificate accounts are not subject to an early withdrawal penalty if collateralized to these loans.

Clearly, there are ways to invest money with safety and flexibility.

Ask RBFCU