Grow Your Money with Low-Risk Term Share Certificates

We all know saving money is important. But saving for your future can be an intimidating process. You're not alone if you’re feeling overwhelmed by your investment options.

One choice to consider is a term share certificate, an investment that helps you save money and earn interest simultaneously. You can invest your money and benefit from both short-term and long-term gains, making them an attractive option for those looking to increase their savings.

What is a Term Share Certificate?

Term share certificates are a type of investment option available through credit unions and function similarly to a bank’s certificate of deposit, or CD. Compared to other investment options, term share certificates are considered low-risk. They offer a high interest rate for a specific term, typically ranging from six months to five years.

Here’s a quick overview of how term share certificates compare to other types of investments.

Term Share Certificates vs. Savings Accounts
Savings accounts have a lower minimum deposit requirement but term share certificates almost always have a higher interest rate.

Term Share Certificates vs. Stocks
Stocks offer potentially higher returns than term share certificates but have a higher risk. Additionally, stocks don’t offer a fixed interest rate like term share certificates.

Term Share Certificates vs. Bonds
Bonds tend to offer fixed credit rates like term share certificates but don’t earn as much in interest.

Term Share Certificates vs. Mutual Funds
Mutual funds often have fees associated with them, while term share certificates are typically fee-free.

What is the Difference Between a Term Share Certificate and CD?
Both term share certificates and CDs offer secure ways to grow your money. Term share certificates often provide more flexible terms and competitive interest rates than CDs. CDs are typically associated with banks, while term share certificates are an exclusive credit union investment option.

The government also insures term share certificates through the National Credit Union Administration (NCUA). The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF), which guarantees credit union deposits of up to $250,000 per account holder.

How Term Share Certificates Work
Term share certificates generate earnings through fixed interest rates. A certificate’s unique interest rate is determined by its term, deposit amount, and the credit union’s current interest rate policies.

Let’s say Jane invests $10,000 in a term share certificate with a 12-month term and an interest rate of 2.5%. Her credit union compounds the interest monthly. At the end of the term, Jane’s investment will have earned approximately $252 in interest.

Interest rates and earning potentials can vary depending on a credit union’s policies and the specific terms of the certificate. For example, at Provident Credit Union, we offer a variety of term share certificate options that allow our members to tailor their investments. Here are some important terms and conditions to keep in mind when considering term share certificates:

• Length of terms available
• Minimum deposit amounts
• Interest rates
• Early withdrawal penalties
• Automatic renewal policies

Understanding the investment details of a certificate can help you make the most of your investment and avoid any surprises down the line.

Advantages of Investing in a Term Share Certificate

What are the advantages of term share certificates as an investment option? There are several to consider, making them a popular choice for beginners as well as experienced investors.

Fixed Interest Rates
Selecting a fixed rate term share certificates offer predictable earnings and ability with fixed interest rates for the entire duration of the term. When you invest in a fixed rate term share certificate, you’ll know exactly what your return will be over the life of the investment, allowing you to plan and budget accordingly.

Insured Deposits
As mentioned, term share certificates are insured by the NCUA, adding an extra layer of security to your investment. 

Higher Interest Rates
Compared to other investments, term share certificates offer higher interest rates. Higher interest rates offer the potential for increased earnings and faster growth. A term share certificate calculator can help you estimate potential returns.

Flexible Terms
Term share certificates offer a range of terms for investors to choose from. So whether you want a short term of only a few months or need a longer term that will help you grow your money as much as possible, a term share certificate will often match your ideal timeline.

No Fees
Term share certificates typically don’t have account maintenance or transaction fees, making them a cost-effective option for budget-conscious investors. However, a penalty may be imposed for withdrawals before maturity for certificates.

Risks of Investing in a Term Share Certificate

While term share certificates can provide a range of benefits, it’s important to be aware of associated potential risks, as outlined below.

Limited Liquidity
You may be unable to access your term share certificate funds on demand. Withdrawing funds early may result in a penalty or forfeiting some of your interest earnings. Choosing a certificate with a shorter term can minimize this risk.

Opportunity Cost
While fixed rates offer predictability and a guaranteed return, you may miss out on higher potential earnings if interest rates rise during your certificate's term.

Minimum Deposit Requirements
Term share certificates may have minimum deposit requirements, keeping them out of reach for investors who are starting small.

Lower Yields Than Riskier Investments
Term share certificates are a safe investment, which greatly benefits investors with a low-risk appetite. But for those with higher risk tolerance, term share certificates may not provide the type of yields you are after. A term share certificate calculator can help you determine if the risks match the potential rewards. 

How to Invest in a Term Share Certificate

Purchasing a term share certificate is a fairly straightforward process. At Provident Credit Union, we’re committed to making it easy for members to access various investment options, including term share certificates.

If you’re interested in purchasing a certificate, there are a few simple steps you can follow.

1.    Become a member of Provident Credit Union to access our best rates and terms.
2.    Determine your investment amount.
3.    Choose your certificate term.
4.    Review your terms and conditions, and open your account.
5.    Sit back and watch your money grow through your guaranteed fixed interest rate.

Our team can help you understand how much your term share certificate investment can earn.

Make the Most of Your Money with Term Share Certificates

Term share certificates can be a great investment option for those looking to grow their money without taking on too much risk. Remember that choosing an investment option that aligns with your financial goals and needs is important, and prioritizing safety and security is crucial. 

By taking the time to consider the terms and conditions carefully and weighing the pros and cons, you can make an informed decision about whether a term share certificate is the best investment option for you.

If you’re ready to maximize your savings with term share certificates, we invite you to explore our certificate products.