Certificates of Deposit are similar to savings accounts, but you need to deposit a specified amount, and leave the money in your account for a certain period of time. The length of time you must wait, and the minimum amount, varies from bank to bank and type of CD. The benefit of Certificates of Deposit are that they earn more interest than a regular savings account or another type of money market account. The longer you are willing to leave your money, the more interest you will earn. When you purchase a CD, you will get a certificate entitling you to receive interest. It will have a maturity date, a specified fixed interest rate and can be issued in any denomination. Most CD's mature anywhere from one month to five years. If your CD is less than $100,000, it is called a "small CD" while those over $100,000 are called "large" or "jumbo CD's."

Pros:

You can accurately calculate expected earnings when you get your certificate of deposit. CD's that are deposited are also FDIC insured for up to $100,000. Many elderly people like CD's for this reason, as they can maintain their capital for the remainder of their life.

Cons:

If you choose a longer CD maturity to get a higher rate of interest, you no longer have access to those funds. If you touch the money in the CD account before it matures, you will most likely need to pay a penalty. It is easy to find a Certificate of Deposit calculator online. This allows you to estimate what you would receive in interest, based on the amount of the CD, length of time, and interest rate.