Savings, CDs and bonds explained (the US)
Plain-English basics for people in the US. This explains how things work and where to check the official rules. It never picks a product for you.
Savings account
Money you can take out any time. The interest rate can change whenever the bank decides. Good for money you may need soon.
Certificate of deposit (CD)
You agree to leave money for a set time (for example 6 months or 3 years) at an interest rate agreed at the start. Taking it out early usually costs some of the interest, or is not allowed. The rate is fixed, but rising prices (inflation) can still mean the money buys less at the end.
Bonds
A bond is a loan you make to a government or a company. It usually pays interest at set times and returns the amount borrowed on a set date. In the US the common types are US Treasury bills, notes and bonds, savings bonds, and corporate and municipal bonds. Treasuries can be bought directly at TreasuryDirect or through a broker.
- If you sell before the end date, the price can be higher or lower than you paid - bond prices fall when interest rates rise.
- Company bonds pay more interest because the company might not pay back. Check who the borrower is.
- Bond funds never 'end', so their price moves all the time.
What covers a deposit
Bank deposits are insured by the FDIC up to US$250,000 per depositor, per insured bank, for each account ownership category (credit unions: NCUA). Brokerage accounts are different: SIPC helps if a member firm fails, but never covers a fall in prices.
This cover applies to deposits with licensed banks, not to funds, shares, bonds you buy yourself or crypto.
Regulator guide: the SEC's Investor.gov.
General information, not a recommendation. This page explains how things work. It does not pick a product for you or say where to put your money, and it does not consider your goals or situation. For personal advice talk to a licensed adviser in the US - a registered investment adviser or a broker registered with FINRA.
Frequently asked questions
- Can I lose money in a bond?
- Yes - if you sell before the end date when rates have risen, or if the borrower cannot pay back. Government bonds of your own country carry less of the second risk.
- Is my deposit covered?
- Deposits at licensed banks are covered up to a limit set by the government scheme in your country; check the official page linked above.
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