I was asking my friend earlier what a CD is in banking since he is currently working for a bank… I told him why would a depositor need a CD if he already has either an ATM card or a passbook? He just burst in laughter and told me that a CD in banking is not a compact disc to save any information or files but a certificate of deposits.

He explained further that a certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. He said CDs are similar to savings accounts in that they are insured and thus practically risk-free; they are “money in the bank” (CDs are insured by the FDIC for banks or by the NCUA for credit unions). They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest. I then told him I know what a time deposit is and he should have just told me that it is just similar to it instead of reciting an epic about it.

I had a one on one talk to my father last night, but strangely it wasn’t like how it was before… as I remember correctly, it was usually a situation where he would keep on talking while I keep on asking questions, last night on the other hand was a different case. He said he was able to get some ample amount of money from his previous company, but instead spending them, he wants me to help him find good ways to invest his money. I gave him five options to choose from. First is to have a money-market account because it typically pays more than a savings account, but it is still FDIC insured so his money will be very safe there. At least, instead of waiting forever to get a good amount of interest for his money, his money will make money of its own with it. He could also try bonds, but of course, this will vary in rates and risk from 5% Treasury Department-backed bonds to 15% risky junk bonds. He has to still do to his research and also consider where the interest rates are moving. Another that he could try is to loan money, where he can earn 9% to 30% depending on the credit history of the person being lent to. Certificate of Deposit is also a good idea since they have better rates in there, and lastly, he can make use of foreign currency trading instead of investing in stock market. Money is faster and easier to get back if in case he loses some.