Most people are always talking about saving money but failing to do so because - - they have many reasons. But what of this? If someone buys a certificate of deposit [product offered by most banks] which is almost similar to savings accounts except that you can't withdraw your money for a specified period of time. The upside is that unlike a traditional savings account you earn a higher interest. Can this help one to save more because at least there is the incentive of earning more interest?
Yes, but you need to be careful with these. I've used them quite often, ones where I'd deposit the money for 12 months. But this is only one way of saving and on top of this you should always have another emergency fund since this is an investment that you cannot liquidate fast, maybe even not at all until it runs out!
I'd like to try it out. What would kind of stand in the way are the stringent requirements to wait for a certain period of time before withdrawing your money [or be penalized for that]. That means if you don't have an emergency fund or you suddenly lose your job, well, you'd lose most of the interest accrued if you decide to get that dough.
Most CDs have a higher opening minimum than the traditional savings account. The lowest I've seen in my area is $350 from a brick and mortar bank whereas almost anyone can open a savings account for as little as $25 or $50. I'd shop around and compare those with 12, 24, 48 and 60-month options. Five years sounds like a long time but you will get the maximum return.
