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One of the first pieces of advice I get is to build an emergency fund at a bank. Why? »

I have an emergency fund so I don’t need to worry about early withdrawal penalties on my certificates of deposit, do I?

Having an emergency fund of savings and investment in CDs should certainly alleviate any problems with short term unexpected cash needs. With an emergency fund in an account that does not penalize early withdrawal would certainly make it highly unlikely you would need to cash out a long term CD for unexpected short-term money requirements. However, short-term financial problems aren’t the only reason to withdraw early from an investment in a CD. Suppose you purchased a five-year CD three years ago when interest rates were very low; is it worthwhile to take the early withdrawal penalty and use the proceeds to buy a new CD at today’s much-better rates? That will take some analysis on your part, but it’s definitely worth the time.

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Banking & CD FAQs

The bank required two forms of picture I.D. Can it do that?

Yes. The bank can require two forms of picture identification. Federal banking laws or regulations does not prohibit national banks from asking customers for additional identification.

The bank where I have my CDs says that interest on the CD account is compounding daily. If the interest earned from the CD is paid monthly, how can they say they are compounding it daily?

When your bank states it compounds the interest daily on a CD but it pays out that interest monthly, it is engaging in a fairly standard process. The bank calculates your interest each day on the CD and simply processes that amount as a computer entry without actually paying that interest out.

I am trying to decide whether to open a savings account or a CD. Which type of account is better?

There is no right answer to this question. Generally, a CD will pay a higher interest rate than a savings account. CDs have penalties for early withdrawal, which restricts access to your money. A high yield savings account will limit the amount of withdrawals that can be made each month; however, any

What are business cycles and how do they affect the economy?

Business cycles are the “ups and downs” in economic activity, defined in terms of periods of expansion or recession. During expansions, the economy, measured by indicators like jobs, production, and sales, is growing–in real terms, after excluding the effects of inflation. Recessions are periods when the economy is shrinking or contracting.

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