CD Laddering which is Certificate of Deposit laddering allows you to divide your money and constantly recieve the highest yield that CDs are offering. A CD ladder can consist of a maximum of 10 Certificates spanning six months apart over the course of five years. The plan is to split all the money that you would put into a CD ten times and spread that over the CD terms. After each CD expires renew it as a five year CD and watch your money grow. Because your money is always receiving the highest rate you never have to worry about inflation and you will always have access to 1/10 of your money. Consider it, it’s a great way to make money risk free.
Money market accounts are just like saving accounts except that they are not FDIC insured (most of the time). The benefit of money market accounts as opposed to regular savings accounts is that they can make you a bit more money with not a lot of risk. Now the amount of money that you will make is minimal but every penny counts. I for one have a Paypal Money market account and that seems to work very well for me although I keep a very little amount of money within it. I recommend money market accounts only if you are able to take some risk, otherwise I recommend going with a strong bank with a good history like FNBO or ING bank.
Bonds are pieces of debt sold to you at face value that yield a certain interest percent that is paid at maturity which is added to the principal value. Bonds are usually seen as safe investments because you can buy them based on their rating of credit worthiness, or you can buy treasury bills which i went into detail about a post 2 weeks ago. Buying T-bill is usually the safest investment because it is backed by the full faith and credit of the U.S government which has a triple AAA security rating. Bonds can also be bought for companies like General Electric or any other company but these carry some risk albeit a higher yield.
Some people have been talking about buying stocks now. Warren Buffet has said “it’s the time to be greedy”, and many certified financial planners are telling clients to get into the stock market. I for one disagree with that because I feel that things are only going to get worse before they get better. In addition with our unertain markets anything can happen whether it’s the dollar hitting a all time low or the house reports coming out saying that we are once again spending less thus lowering our GDP. Of course who am I to give my financial advice? I have only had a ever increasing networth since I was in the second grade.
Treasury Bills also referred to as T-Bills are issued by the fed as a way to raise funds on open market. Buying and selling debt is done by the FOMC or the Federal Open Market Committee. During the years the rate of T-Bills have been on the decline because the federal reserve has decided to lower rates in a failed attempt to try and jump start the economy. Unfortunately for savings like ourselves we are hit the hardest because inflation has been on the increase for slight while. Luckily with the price of oil on the decline cost push inflation has been on the decline but rates still haven’t caught up to the point of inflation which is ~4%.
People often complain about the horrible interest that they get at regular brick and mortar bank accounts but they never seem to think about their low balance in their savings account. Regardless of the interest that you earn, you won’t “earn” anything unless you plan to actually have some money in the account. I currently earn 3.25% at FNBO Direct but I have over six thousand dollars in there that let me earn interest. In addition I’m constantly adding money to the account as it comes in, so let this be a lesson to everyone, save. Saving accounts are great, but look for them online and make sure that they are FDIC insured.
