Looking for a way to get better interest rates than a money market account, but don’t want the risk of investing in stocks? A term share certificate or commonly known as certificate of deposit (CD) may be just what you need. It’s a low-risk way to build your savings.

When you open a CD, you agree not to withdraw the funds until its maturity date, which could be anywhere from a few months to several years. You can close a CD before the term ends, but you will pay an early withdrawal penalty for doing so. CDs offer a higher interest rate than traditional savings or money market accounts because the funds in a CD can only be withdrawn after a certain period of time. Typically, CDs with longer term lengths have higher interest rates.

How do you decide which CD to invest in?

Think about the length of your CD term and how long you can afford to invest your money.
You don’t want to withdraw your money early because you’ll be charged an early withdrawal fee. If you’re saving for a short-term goal, you may want a CD with a six- or 12-month term. But if you’re building your retirement savings, consider a five-year CD.

Compare CD rates before you invest in one.
Shop around to find a high-yield CD with optimal terms for your situation. Know what the current rates are before you make your choice. Comparing rates will give you an idea of how much you’ll make over the life of your CD term. Some financial institutions will even offer you a higher rate the more products and services you have with them. GCEFCU offers a Premium Deposit Account term share, where you earn ½% higher than normal.

Explore different product options.
With a traditional CD, you deposit a fixed amount of money for a specific term and receive a predetermined interest rate. But, you usually can’t add funds to the CD prior to maturity and there are stiff penalties for early withdrawal. For more flexibility, consider a College Saver CD or a My Savings Goal account. Remember to check the terms of each type of account to see what matches your needs.

Check the minimum deposit requirements and withdrawal fees.
This is an important step because these vary between financial institutions and from CD to CD. Always make sure your CD is insured by the NCUA or FDIC.

By looking at these factors, you’ll be able to choose a CD that meets your needs and time frame. For more information about CDs offered at Gulf Coast Educators, click here, or give us a call at 281.487.9333.

Information is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author.

Caylee Smith, Marketing Coordinator

As your typical millennial, I like to question everything. Why do I still go out to eat when I’m trying to save money? Why do I even go to Target when I know very well that I will spend too much? Some might say I have no self-control, and others will say I have a fear of missing out. Both of which are slightly true.

I’m not alone here, though. According to a recent survey by Bankrate, 19% of Americans have no savings at all, and 21% save less than 5% of their income. Savings guru, Dave Ramsey, says that you should save at least 15% of your paycheck for retirement alone (that doesn’t include emergency or travel savings either).

So how do we fix this? How do we re-wire our brains to make saving a priority?

First, you need to make saving money a habit. This is what they tell you when you start working out for the first time, too. The same logic applies here though. In order to make any type of lifestyle change, you need to build it into your routine. You need to make it a habit.

The 3 R’s of Habit Change

According to Charles Duhigg (author of The Power of Habit), every habit you have, both good and bad, follow the same 3-step pattern.
1. Reminder – The trigger that initiates the behavior (ex: reminder on your phone once a week)
2. Routine – The behavior itself; the action you take (ex: transfer money to savings)
3. Reward – The benefit you gain from doing the behavior (ex: savings – yay!)

Step 1: Create Your Reminder

The first step in creating your savings habit is to create a reminder, something that is automatic or that you do every day without hesitation. Since transferring money to your savings isn’t something that someone typically does every day, we can start with creating a habit to simply check your account balance every day. This isn’t technically saving money, but watching your account and monitoring your spending is always a good habit to create anyways. To give an example, create a habit of checking your account by downloading your credit union’s mobile app, and checking your account from your phone first thing in the morning before you get out of bed. The trigger/reminder here could be turning off your alarm clock.

Step 2: Get in Routine

It is easy to create a routine when it is something that you can’t say “no” to. What harm is there in checking your account balance? Hit the snooze, and pick up the phone. Once your hand is in motion, eventually your fingers will begin to automatically hover towards your credit union’s app.

“How will checking my account save me money?” I’m glad you asked! There is an area of our brain called the insula, which is stimulated when it experiences something unpleasant. The more stimulation in the insula, the less likely you are to keep doing what you are doing. According to a study in the Journal of Consumer Research, individuals who viewed expensive buying decisions had increased insula stimulation. Whereas individuals who saved and had cash in an account brought intense pleasure. Therefore, seeing yourself spending too much money every day will eventually cause you to stop spending so frivolously, and seeing your savings build up will cause you to save more.

Step 3: Reward Yourself

People do things that make them happy. Your reward doesn’t have to be something big. It could be something as simple as getting to write a checkmark on the calendar for that day. Or simply telling yourself, “good job!” It may seem silly at first, but go a whole month with writing checkmarks on a calendar, and see how you feel after missing one day.

In addition to viewing your account every day, you also need to create a paycheck habit. Something similar to your checking your account habit, but one that only occurs once a week or whenever you get paid. To make it even easier, you could set up an automatic transfer to your savings account, this way you don’t even see it. For those that don’t like setting up automatic transfers, create a weekly reminder on your phone to transfer money instead. The process is the same.

Remember, building a savings takes time. I like instant gratification just as much as the next person, but that isn’t something that happens with saving money. Create your habit, and watch your savings grow.

Sources:
Bankrate: https://www.bankrate.com/banking/savings/financial-security-0318/
Three Steps in Habit Change: https://jamesclear.com/three-steps-habit-change
Journal of Consumer Research: https://www.moneycrashers.com/psychology-of-money-saving-spending-habits/

Jamieson Mackay, Sr VP Marketing & Business Development

My daughter turned 15 recently and decided that this Summer she would get a job as a lifeguard to earn money for a new phone. I must say, that made me a super proud dad. Not just the initiative to get hired, but setting a savings goal is something we talk about often. It’s nice to know she’s listening.

So after a few days of working, it was time for the first paycheck. Her excitement about her first paycheck faded a bit when she noticed the amount was a bit lower than she was expecting. Yes, this was her introduction to taxes.

My wife and I decided that this was a great teachable moment, so we explained the different taxes that come out of your paycheck and how next year in February or March she’ll have to file her taxes with the IRS. We told her that she will get a refund on some of the Federal Income tax, but not the Social Security or Medicare taxes paid.

Another thing my wife insisted on was that at least 10% of each paycheck be put into savings at the time of deposit. It’s a rule my wife & I live by and are trying to teach our daughter. She has been really good about keeping up with her student checking account and using the mobile app to check her balances before making any purchases. But if she wants that shiny new phone, she’ll have to save at least 10%, if not more.

The main point in all of this is that you need to have open communication with your teens about money. Once they start earning a paycheck, it gives them a greater appreciation for all you’ve done for them over the years and hopefully gives them a greater appreciation for money. Without any discussion about the subject, you’re relying on your teen to make wise decisions. As I wrote in a previous entry, those wise decisions did not come naturally to me and I had to learn the hard way.

By helping your children form good savings behaviors at a young age, habits will form that will last them a lifetime. Knowing how to save wisely is just as (if not more) important than tying their shoes or riding a bike. This is a skill set that if learned early, can help them tremendously in their adult life. See what you can do to help by reviewing the resources below.

Pre-Elementary School

Age: 3 – 5 years old
At this age, it may be too soon for them to comprehend how much something is worth. However, it is always a good idea to get them comfortable with what money is and what it is used for.

Tips:

• Start a “Savings Jar” and teach your child to place a coin in the jar every day. Once the jar reaches a certain amount, allow them to purchase a toy or special item.
• Pretend Play – Cut out pretend money for your child to play with. You can download a copy by clicking here.

Elementary to Middle School

Age: 6 – 12 years old
At this age, your child will begin to absorb habits and attitudes about what their parents do and say. In fact, parents are the most important influence on a child’s financial world.

Tips:

• Start giving your child an allowance, or give them to opportunity to earn money by doing extra chores around the house.
• Take them to the credit union to make deposits in their account. With our Sandy Savers Kids Club, for every $10 deposit, the member gets a stamp. After 5 stamps, they get a cool prize.
• When planning your child’s birthday party, give them a budget and allow them to help decide what they would like to have. This will not only teach your child the cost of their party, but will help you to stay in budget as well.
• Consider a “matching plan” for your child’s savings. For every dollar or two they save, you deposit 25 cents. Use this example to explain to them how dividends work, and the more they save, the more free money they earn.
• Make a shopping list with your child before heading to the grocery store. Talk about how difficult it can be to keep to just your list. If you happen to go over, add up how much money you spent buying extra items.
• Show your child what information is included on a receipt, and how sales tax works. You can download this helpful worksheet here.

High School & Young Adulthood

Age: 13 – 21 years old
At this age, teens and young adults start making financial decisions on their own. Teach them how to spend wisely, and then monitor their shopping before setting them free on their own.

Tips:

• Show them what a paycheck looks like. You can download a worksheet here. If they already have a job, point out all the different parts of their check to show them where it all goes – gross pay, social security, health insurance, etc.
• As a general rule, it is always good to save at least 10% of what you earn. Help your child set up an automatic withdrawal online, or through direct deposit, so their money is automatically saved each paycheck.
• Help your child create a budget. Teach them how it is important to make more than you spend, otherwise you will go into debt.
• Once your teen has their own checking account, they can begin using their own debit card as well. Show them the fees associated with overdrawing their account, and how they can add up if they aren’t keeping track of what all they have spent.
• Once your child turns 18, the credit card offers will start rolling in. It is important that they know this money has to be paid back, and the expensive consequences of revolving debt. To teach them a safe way to earn credit, open a small $500 credit card, and have them pay off the balance each month. If your teen isn’t ready for that, they can always open a shared secured card instead.

Saving your money isn’t always easy, especially when you don’t have a lot to spare. After paying all your usual expenses, there may be very little “fun” money at the end of the month. When we do find ourselves with some extra cash, like a tax refund, many of us rush out to buy those shoes or that electronic gadget we’ve been eying for months instead of putting it into our savings.

Why do we do that? Why do we spend the money we planned on using for our future?

We can blame it on our brains. Behavioral science has shown that humans are hard-wired to act on impulse and that it takes conscious thought to delay gratification. It’s also much easier to focus on the present than our future.

To help you save for your future, behavioral science suggests visualizing yourself as you might look when you’re older. For instance, if you want to save for retirement, imagine yourself at age 67, living comfortably, maybe travelling the country, or having the time and the means to do something you’ve always wanted to do. According to a study done in 2014, this technique works. The researchers took photos of 50 college students and digitally altered each person’s photo to make them look 70 years old. The participants were instructed to study the photos. Then they were told to imagine receiving $1,000 and were asked how they’d like to use the money: buy something now for a special person or for extravagant night out, or put that money into a retirement fund. After seeing a photo of themselves at 70 years old, the majority allocated more of the money to their retirement fund than to the other options.

Another way to help you save for your future is by making it a habit. Start with small goals. For instance, commit to putting a certain amount, say $10, into a savings account every week. If you have direct deposit, you might want to consider setting up an automatic transfer of $10 into your savings account every time your paycheck is deposited. Over time, you can gradually increase the amount by a dollar or two.

Teach Your Children How to Save
To help your children get into the savings habit, start by having them cut out pictures of something they’d like to have someday and post the images where they’ll see them often. Then help them open a savings account at your credit union. You can open an account with as little as $10. Encourage your child to make regular small deposits each week. Tell them their money will earn interest while it’s in their account. If they keep this routine going, they’ll quickly see their savings grow.

Source: Credit Union National Association