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Share Certificates (or CDs) vs. Money Market Accounts: Fixed Time Period or Flexibility

Jun 19, 2024

Maintaining a diverse financial portfolio helps reduce investment risk and generates greater returns. Part of that balanced approach involves incorporating assets that provide a fixed time period for savings and flexibility. Suppose you're considering adding a Money Market Account or Share Certificate (also referred to as a CD) as part of your portfolio strategy. In that case, it’s essential to understand that both are valuable assets but with slight differences.

Simply put, one provides a fixed time period for your savings while the other offers flexibility. But a deeper understanding could help you better prepare to build an actionable portfolio that achieves your financial and quality of life goals. 


Low Risk and Steady Returns

Dabbling in the stock market means your investment potential fluctuates with market conditions – which may bring big gains but even greater losses. Each investment option is specifically designed to deliver a select number of benefits, over and against a risk threshold. Items like Share Certificates (or CDs) and Money Market Accounts are considered low-risk opportunities offering more bang for your buck than other investment options as well as less risk.

Financial Security

At CCCU, your deposits are insured by the NCUA up to $250,000.

Guaranteed Returns

Not only do you get peace of mind knowing both our Share Certificates and Money Market Accounts are secure, but you can also rest assured knowing your money will generate guaranteed returns. Share Certificates provide a fixed return helping to grow your money faster than if it were in a traditional savings account. The best Share Certificates offer an Annual Percentage Yield (APY) that compounds interest throughout the year. You may notice periodic Share Certificate growth as the compounded interest is added to the certificate. The greater the frequency, the better the return when the Share Certificate matures.

Investing in the stock market can be a lot like spending a weekend in Las Vegas – you never know what might happen. By contrast, Money Market Accounts deliver steady returns without any surprises. Money markets also offer a higher Annual Percentage Yield (APY) compared to a regular Savings Accounts but unlike a Share Certificate, your growing potential increases as your balance grows. Money Market Accounts are designed with tiered thresholds; the higher your balance the more opportunity to earn.

Families can use a money market account to save for important expenses such as weddings, college tuition, and unexpected emergencies. 

Advantages of Share Certificates vs. Money Market Accounts

As you conduct your due diligence about Share Certificates versus Money Market Accounts, you'll discover that they both offer solid benefits. Deciding which option best suits your needs depends on your financial goals.   

Benefits of Share Certificates

Share Certificates offer a variety of terms between six months and five years. Once the Share Certificate matures — i.e., completes its full term — you can withdraw the initial deposit plus the accumulated interest. These are other benefits people enjoy by incorporating Share Certificates into their portfolios.

  • Lock in Rate: If you like a rate and want to lock it in for a set-period of time, a Share Certificate may present the right opportunity for you. 

  • Diversify Your Earnings: A Share Certificate allows you to create both short- and long-term goals. You can open multiple Share Certificates each at different terms allowing you to diversify your earning potential with different balances and at different interest rates.

  • Creates Savings Habits: Because Share Certificates require you to tuck away a lump sum for a set period of time, it can help you create smart savings habits by deterring you from accessing it before the maturity date.   

It’s also essential to note that when you open a Share Certificate (or CD) you can calculate returns during the fixed time period. Savvy investors check for the best rates and re-invest.


Benefits of Money Market Accounts

When compared to Share Certificates (or CDs), the critical benefit appears to be the flexible access to cash, or “liquidity,” as financial insiders call it. But when deciding how much to invest in a Money Market Account, there are other things to consider. These rank among the reasons working families can benefit from Money Market Accounts at CCCU.

  • Accessibility: In a Money Market Account, your funds are accessible when you need them - so you can be ready for anything. 

  • Grow Your Earning Potential: Money Market Account interest rates are tiered and dependent on your minimum balance for maximizing earning potential. You may regularly add funds in order to continue to build higher gains. 

  • Supplemental Savings: You can use a Money Market Account alongside a specialized savings account to save for a financial goal or tuck away funds for a rainy day while earning a higher dividend than a traditional Savings Account.

Families also use Money Market Accounts to save for short-term savings goals. With convenient access to funds, you can use your money whenever you need it. 

Factors to Consider: Share Certificates vs. Money Market Accounts

To make an informed decision about whether a Share Certificate or Money Market account is right for you will require thoughtful consideration. A Share Certificate, for example, does not allow free, flexible access to your cash. Withdrawing funds before the maturity date may result in early withdrawal penalties, meaning you forfeit a portion of your earned dividends.

Similarly, Money Market Accounts usually require maintaining a minimum balance. The threshold isn’t generally difficult to manage, but some high-yield Money Market Accounts may require more significant minimum balance requirements. With either option, be sure to conduct your due diligence about available rates, terms, and minimum balances, as well as any applicable fees.  

Consolidated Community Credit Union Can Help You Optimize Your Savings Potential 

As you can see, both savings options provide excellent benefits. In terms of building a balanced and diverse financial portfolio strategy that offers guaranteed returns with little risk, it may be wise to invest in both. The real question may be how much to allot to Share Certificates (or CDs) vs Money Market accounts.

If you’re ready to start optimizing your savings potential, we’re excited to help you achieve your financial goals! Contact us today!