What Is a Timed Certificate of Deposit?

Video Transcript

"This is Financial Advisor Patrick Munro talking about what is a timed CD. When you give money to a bank and they issue you, in turn, a receipt for that money by way of a certificate of deposit, you get to pick the term and the time when the bank gets to hold your money. Normally the minimum hold time that the bank will receive the money is three to six months. That is a shorter time period so therefore the rate that you receive on the money is lower. The longer the time horizon that the bank gets to hold your money, the higher the interest rate that you'll receive. So therefore a six month CD pays less than a twelve month CD, a twelve month CD pays less than a two year CD. Normally you should look at the liquidity options that you have. If you need your money sooner than two years make sure you don't go too far out on the time horizon for a higher rate of return as you might find yourself short of cash during that long two year horizon. Try to find a happy balance, if you will, in between, and then you and your certificate of deposit can be reinvested to make even more money. This is Patrick Munro talking about the benefits of timed certificates of deposit."