Difference between Savings account and CD account? / How to build a CD Ladder

I mean yes CDs they exist but can you

really make more money with them that

was the regular high-yield savings

account one of the best ways to save

your money with low-risk and not lose it

to inflation is to keep it in a savings

account regular savings account usually

generate the super low rates like point

zero one percent which doesn't make any

difference at all that's why you want to

use a good high-yield savings account

these can produce interest that can keep

up with the Fed interest rates as well

as generate a little profit on top of

keeping up with inflation but if you

want even higher rate of return you may

want to consider getting a certificate

of deposit or CD CD is a savings account

that has fixed interest rate and fixed

date of withdrawal withdrawal a fixed

date of withdrawal also known as

maturity date but our CDs really that

much better than regular high-yield

savings accounts well any savings

account has its limitations for example

with savings account you can easily

deposit in withdraw your money just like

with regular checking account but you

cannot have more than six withdrawals

per month even though it sounds kind of

stupid and inconvenient it actually

stimulates people to keep savings in

their savings account and not use that

money left and right with the CD you

don't have this problem but you have

another one to give that higher interest

rate you have to leave your money in the

bank for specified period of time it's

called the term length the term lengths

can range from three months to five

years and if you withdraw your money

before that period expires then just all

your interest is gone and you're back to

where you started

because usually there's an early

withdrawal fee that pretty much takes

away all your gains so why would you

even consider leaving your money in the

bank and not touch it for like five

years because the longer the term length

the higher the interest rate you'll earn

the rates change all the time dependent

on the Fed interest rates so look at the

rates in this following example is a

general idea for example as a favorite

2020 the lovely Ally banks offers 2% APY

for a one-year CD 2.05 a py for three

year CD and 2.1

five percent APY for a five-year city

yes the increase doesn't seem that

dramatic but it's there and keeping in

mind that a line on high-yield savings

account gets you just one point six

percent apy this rate seemed like a

pretty good deal by the way in case you

don't know what I mean by Fed rates and

what the Fed rates are check out my

video about it to learn more link in the

description and hit the like button if

you enjoyed this video so far so should

you just go and buy a bunch of CDs now

well it depends on what your plan is for

your savings it would be twice as

frustrating to deal with an emergency

situation and lose all your accumulated

interest due to the early withdrawal

fees so if you think you'd need easy

access to your money in the next year or

two you may want to stick to your

high-yield savings account instead

however if you watch this far and you're

still interested in high interest rates

that CDs offer but also one the

flexibility of a regular high-yield

savings account then this following

technique is for you my friends it's

called a CD ladder in CD ladder you

invest proportionally in different term

links and then every time the shorter

term atures you reinvest that money in

the new long term CD let me give you an

example let's say you have $1,000 you

divide it into five parts of 200 and put

each of those two hundreds into 1 2 3 4

and 5-year CDs once the one year CD

matures you take that money and buy a

five-year city next year take the funds

from the mature two-year city and buy

another 5-year City and then repeat this

process every year until you have 5

five-year CDs matured every year this

way eventually you will be getting the

highest possible APY on your entire

amount since the 5-year CDs have the

highest rate as well as be able to use a

portion of that money in case you need


this approach is good for those who have

cash they don't need right now but will

want to use it in a few years for

example when you're saving for a house

down payment and want to boost your same

isn't it so can you make more money with

CDs versus savings accounts yes you can

but that's not the quickest way to grow

your money and you need to be very good


planning your finances ahead as well but

if you want the easiest way to grow your

money at a reasonably good rate as well

as the flexibility to use the money in

case you get a nice investment

opportunity for example then you may

want us to stick to a solid high-yield

savings account

and I would also like to know what do

you think is the best low-risk way to

grow your money if you enjoyed this

video then you know what to do and also

share this video with all your fellow

investors my name is Alex this is rotten

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