The answer to the question – “Money in the bank or money in CDs?” – seems rather obvious, right now, as “obvious” tends to be in the here and now. The obvious answer is that, with historically low interest rates on bank deposits, putting your money into certificates of deposit could cost you money, with inflation eating away at the modest interest.
But I once knew someone who made it a habit to put away a little money every week. First, into a “money market account”, which paid a bit more than an regular savings account, and then when the cash in the money market account got high enough a large portion would be transferred into a “certificate of deposit” or “CD”, always at a higher interest rate. (Higher because of an agreement to keep the funds tied up for a longer period of time.)
This pattern went on for years, then decades. Rinse. Repeat. Drip. Drip. Drip.
Now most of you already know the outcome. It’s the classic “hare versus turtle” scenario. Over time the amount accumulated grew, significantly. Over the years there were times when interest rates spiked and the money on deposit soon increased significantly, sometimes are rates better than the stock market or at least better than certain market segments or individual investments. Yes, there were also periods of inflation, but when it mattered – when the money was actually needed – it was there to fill the needs and wants.
You know it works – disciplined investing – but do you actually practice . . the discipline? Or did you put all your money in the market and then panic, when others did the same, and pull your money out only to sit on the sidelines when the market rebounded?
Do you actually “put away a little every week” for retirement, college funds, wedding funds, etc.?
Do I? No, not religiously. It always seems that there’s some other pressing issue, matter. Something needed. Some new reason or excuse to spend versus save. You too?
Also, as some of us keep getting older, and closer to retirement age, it looks like we won’t make it to the promised landing of an easy retirement. But, even given that, are we doing our very best to cut back . . AND SAVE . . as in “PUT AWAY THE SAVINGS” for a future day? (Sorry, I’m not shouting, just attempting to reach across the noise and distraction.)
So, how about a promise to ourselves. One that sounds a bit like “Well, this is too small to really matter or make a difference, these $10.00 or $20.00 or $50.00 that I’m putting away each week . . but I’ll do it any way . . and let whatever happens, happen.”
You and I both know what will happen if we put another $20.00 into our retirement fund each week.
What will happen is that whenever that day comes, and it may come a year or more sooner if we act now, whenever it comes we will have more for the needs. Perhaps an extra lunch – or two – out on the town, each week, for the extra lunch on the town we passed up now.
As the saying goes – “Just do it!”.