Planning for Tomorrow: How Share Certificates Can Help Meet Long-Term Goals

Meeting Your Money Goals

What are you saving for? A rainy day or a wedding? A new car or a dream vacation when your kids graduate? Retirement? Whatever your goals, understanding the long-term savings options available to you can help you plan better for the future.

When it comes to saving money – and using that money to earn money – there are a variety of long-term savings options out there. From investing in the stock market to putting money in a savings account at your local credit union, the savings vehicle you choose can depend on a lot of variables. For savings goals where you know the time-period (or exact date) you’ll be using the money, Share Certificates can be a safe, secure and high yield option. In fact, According to American Share Insurance (ASI), credit unions are some of the most well-capitalized financial institutions available to investors. That’s because credit unions maintain equity reserves and liquid investments that prioritize their membership’s financial safety and soundness – not shareholder returns.

The U.S. Securities & Exchange Commission (SEC) oversees the country’s banks and financial institutions. They define a share Certificate – also sometimes referred to as a Certificate of Deposit, or a CD – as “a savings account that holds a fixed amount of money for a fixed period of time, such as 6 months, 1 year or 5 years. In exchange, the issuing bank or credit union pays you interest.”

At the end of that time period – you not only get your initial investment back, but you also get any interest you’ve earned. With today’s higher interest rates, Share Certificates also offer a higher return on your investment than in recent years.

Advantages of Share Certificates

To understand how Share Certificates work, it’s important to understand the difference between a liquid asset and a non-liquid one. Liquid assets mean your money is as easy to access as turning on the faucet. You can draw money out anytime you need it. Other than keeping a stack of cash on hand, checking and savings accounts are considered the most liquid assets available.

Non-liquid assets require more planning and time if you need to withdraw your money from them. If you own a home, it’s an asset – but it’s non-liquid. You’d need to apply for a home equity loan to use any equity you’ve built (or sell your home), and this type of loan takes time to apply for and receive.

Lots of assets fall in the middle of the liquid/non-liquid spectrum. Share Certificates are considered more liquid, but they do come with some restrictions. They offer savings over a specified time period – meaning your savings are locked in and hard to access for the length of the certificate term. The bank holds your money for you – and you get many benefits in return:

Safety. Unlike higher risk investments, the money you put into a Share Certificate is at low risk of being lost, as long as the issuing bank or credit union offers savings insurance. The FDIC is one of the most common insuring institutions, but there are others, like American Share Insurance (ASI), that some credit unions utilize. ASI is a private deposit insurer founded in 1974 and is owned by its insured credit unions. Currently, over 1.2 million members belong to credit unions insured by ASI. When selecting a Share Certificate, make sure the financial institution is not only insured, but that your deposit is covered. A benefit of an ASI-backed institution is that ASI coverage is per account, not per member, like FDIC-backed institutions.

Stability. Turn on the news and you’ll likely hear about the stock market fluctuations or the fallout of risky investments like cryptocurrency. Unlike these types of investments, which come with a level of risk and may be affected by bear markets, Share Certificates lock in your rate. As long as you don’t make any early withdrawals, you’ll receive guaranteed returns and stable performance.

Great Returns on Your Investment. You’ve likely heard about interest rates rising on loans, such as mortgages. However, when it comes to Share Certificates, rising interest rates are actually good news! Financial institutions often offer promotions on Share Certificates with competitive rates, which can help you achieve your short- and long-term goals. By investing in a Share Certificate, you have the potential to earn a guaranteed return on your investment. These promotional rates lock in your annual percentage yield (APY) for the term of the certificate, ensuring that your potential return is maximized. For instance, if you invest $10,000 in a long-term Share Certificate with a 4.25% APY*, you’ll earn $425 in 12 months’ time. The payment is guaranteed, as long as you keep your money in the Share Certificate for the agreed period of time. So, consider investing in a Share Certificate to potentially earn a higher dollar return on your investment.

Growth Potential. Compare the APY* on a Share Certificate versus a savings account, and the growth potential is considerable. For example, say a 12-month Share Certificate offered an APY* of 3.5%. Over a year, every $1,000 invested would earn $35. Banks typically offer about .02% or less as a return on a savings account. Your same $1,000 would only earn 20 cents over a year’s time.

Easy to manage. Share Certificates are also SUPER easy to open and require no management on your part. There’s no application, no waiting for approvals, and some financial institutions offer low minimum deposit requirements. You can open one with as little as $500 and get one step closer to your financial goals. Once the certificate is issued, there’s nothing you need to manage or do until the Share Certificate reaches its maturity date. This accessibility makes Share Certificates an attractive and easy way to invest money.

When would you NOT want to use a Share Certificate?

Your savings account is for unexpected yet critical household expenses. For example, you set aside money “just in case” you need to repair your car or replace your home’s furnace. If you might need the money at a moment’s notice for unplanned expenses like these, you’ll want to keep some money in a more liquid savings account.

If you do need to access your money before the specified time period, be prepared to pay some early withdrawal penalties. Always check the details of your Share Certificate to make sure there are no other unexpected conditions.

Using Share Certificates for Long-Term Goals

Because Share Certificates are locked in with a specified start and end date, they are often used for short-term goals with a specified date – like a wedding or vacation. However, Share Certificates can also be used as a long-term savings option, like building a nest egg for retirement or saving for college.

Consider these strategies when using certificates for long-term savings planning:

Retirement. The low-risk nature of Share Certificates makes them a good complement to other long-term savings plans such as IRAs and 401(k)s, which are popular retirement plans. If you’re considering retiring early and want to avoid the tax penalties associated with early withdrawals from an IRA or 401(k), Share Certificates can provide the low-risk/high return investment you might need to secure your retirement income.

College Expenses. Because Share Certificates are easily accessible, they are sometimes a great first investment tool for young people. They help provide a strong foundation for putting your money to work for you – and seeing how you can turn $1,000 into $1050 with time and patience. Students can “stagger” their Share Certificate investments to make sure they have enough allocated for all four years of school. For example, a senior in high school could take out a 1 year, 2 year, 3 year and 4 year Share Certificate and know they will have money for each year they’re in college. Parents can use this same strategy to move money from other investments and keep it in a low-risk account during the college years.

Emergency Fund. Saving for a rainy day is crucial for financial stability, no matter what stage of life you’re in. A general rule of thumb is to set aside six months’ worth of income in an emergency savings account that is low risk and easily accessible. Share Certificates can provide a great savings vehicle for emergency savings, especially if you use a staggered, or ladder, Share Certificate approach. Here’s how it works: if you have six months’ worth of income saved, you can open several Share Certificates with different maturity dates, such as a nine-month, ten-month, or eleven-month certificate. This approach can potentially yield a higher return on your investment compared to a traditional savings account, all while allowing you to access your money within a specific time frame should you need it. It’s a great investment option to consider for building emergency savings.

Choosing the Right Share Certificate

When looking at the different types of long-term Share Certificates available, it’s important to consider all the fine print. If you’re shopping for a Share Certificate, look at these variables:

  • What is the minimum investment required?
  • How safe is the investment? Is the issuing institution insured and by whom?
  • What interest rate is offered? Does it vary based on the length of the certificate?
  • What maturity dates are offered? Do they match your goals?
  • What penalties are there if you need to withdraw your money early?
  • What type of certificate are you investing in? This article covers traditional certificates, but some financial institutions also offer “jumbo” or “bump-up” certificates. Jumbo certificates require a very high investment, sometimes as much as $100,000. Bump-up certificates may feature a variable interest rate, so they are sometimes less secure.


Share Certificates can be a great long-term savings and investment tool, allowing you to diversify how your money earns interest. Share Certificates are one step above a traditional savings account in terms of ease of use and management. Yet, in today’s higher interest rate environment, they provide financial benefits that can continue to grow. They provide a guaranteed rate of return, making them an attractive option for those seeking a favorable rate of return on their investment. For investors that are just starting out, they can also provide a safe, secure and high-growth potential option that’s easy to get into. Plus, Share Certificates issued by an ASI-backed credit union come with an added layer of safety and security. Credit unions operate differently than banks, with a focus on member needs over shareholder earnings. They are also subjected to regulatory oversight that is often more stringent than their banking counterparts. This gives investors concerned about banking turmoil in the market something they can feel confident about.

If you are interested in opening a Share Certificates savings account, contact FFCCU today.

*APY=annual percentage yield