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Originally posted by hrdwareguy
CD- Certificate of Deposit. You give the money to a bank for a pre determined amount of time and a preset interest rate. The bank invests the money and as long as the stocks/bonds do well, you get the interest. If they don't, you loose money. You can get the money if you need it, but you get penalized.
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CD's are FDIC insured deposit accounts. Basically you are correct here. You give the bank your money, and they keep it for a determinted amount of time. You may not withdraw any funds for that time period. However, if you must make a withdraw the bank may allow you to do so. You would lose your interest and probably pay some sort of a penalty fee.
Quote:
Originally posted by hrdwareguy
Money Market Account - like a limited savings account. You will earn interest, but not as much as in a CD or IRA. You have access to your money and can make a certain small number of withdraws in a given time period before incurring penalties. Something like 3 a year maybe.
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I believe there are different types of Money Market accounts. The ones my bank does are deposit accounts that are also FDIC insured. I think of them as savings accounts with a higher monthly minimum balance, as well as higher interest. There is no risk involved, and the money is liquid. The account does fall under regulation D guidelines, which state you can only make 6 pre-authorized withdrawls per statement cycle.
Both account types are pretty low-risk investments. Don't know if you'd really wanna stick your money in an IRA this early. I guess it depends on your plans. There is better ways to invest your money as suggested above.