This free online CD Savings Comparison Calculator will calculate and compare the interest earnings and annual percentage yield on up to 4 different certificates of deposit.
When shopping for an investment CD it can be very difficult to determine which one is the best, because most of them have different interest rates, maturity dates, and compounding intervals. But now that you have found this free online calculator, this once difficult task is now simply a matter of entering each certificate of deposit and letting the calculator convert the confusing differences into comparable results.
If you would simply like to calculate interest earnings and APY for a single certificate of deposit, please visit the certificate of deposit interest calculator, which also includes the answer to the question, "What is a CD?", along with a link to an unbiased source for more in-depth study.
If you don't have any discretionary income (income over and above your living expenses and debt payments), then CD investing, or any other type of financial investing, should not be your first priority. Your first priority should be to create discretionary income. To do that you will need to either lower your living expenses and/or debt payments, increase your take-home pay, or a combination of both.
If you have discretionary income but you don't have an emergency savings account equal to 3-6 months of your income, then CD investing, or any other type of financial investing, should not be your first priority. Your first priority should be to direct a significant portion of your discretionary income into a type of savings account that doesn't have early withdrawal penalties, for as long as it takes to build up an emergency fund equal to at least 3 months of your income.
If you do have discretionary income, and you have established an emergency fund, but you also have high interest debt, then again, CD investing, or any other type of financial investing, should not be your first priority. Your first priority should be to invest in your debt. Your return on investment of paying off your high interest debt can be five to ten times greater than that of even a high yield certificate of deposit -- especially if you consider that you won't have to pay taxes on the money your earn (save) from paying off debt ahead of schedule.
If you have discretionary income, an emergency fund, and no high-interest debt, only then should you consider CD investing. Of course, investment brokers will give you all kinds of reasons why you shouldn't consider CD investing.
In their attempt to get you to invest your money into an investment that will reward them with commissions and fees, investment "advisors" will be quick to point out that CD investing exposes you to what they refer to as "inflation risk."
The idea behind inflation risk is that if your money is not achieving a return on investment higher than the rate of inflation, you will be going backwards financially. While this is certainly true, inflation risk can be no more harmful to your net worth than the added risk that comes with high yield investments.
Thanks to the promotion of concepts such as inflation risk, I know many people who lost virtually all of their life savings since that fateful day on September 11, 2001 (some lost their homes as well). Meanwhile, people who limited their investing to low-risk or government insured investments (such as CD investing and debt investment), certainly experience a marked reduction in their return on investment, but they didn't lose a single dollar of their principal. And since people like that tend to have little or no debt payments, a reduction in income is far less of a concern for them.
The bottom line when it comes to who you should listen to when it comes to deciding where to invest money, is listen to your own gut feeling and common sense. Will a commissioned broker truly hold your best interests over their own? Do you really want to risk losing the money you worked so hard to earn and sacrificed so much to save? Does the notion of making money without having to work for it fit into the category of "too good to be true?" Sure, there are people who took huge risks in the stock market and won big, but how many do you know personally?
With that, let's use the CD Savings Comparison Calculator to calculate and compare certificates of deposit with varying interest rates, compounding intervals, and maturities.
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Amount entry row: The deposit amount of the CD. Most certificates of deposit require a minimum deposit amount of $500 or more.
Rate entry row: The annual interest rate (APR) of the CD. Enter as a percentage (for .02, enter 2%). Note that this is not the same as annual percentage yield (APY).
Months entry row: The number of months before each CD reaches its maturity date. If you have a 12-month CD, then the maturity date will be roughly 12-months from the date of purchase.
Interval selection row: The frequency of interest compounding that applies to each certificate of deposit. Typically, the more frequent the compounding, the more interest you will earn with the rate and time frame being equal.
FV result row: This how much each certificate of deposit will be worth when it reaches its maturity date -- which includes your original deposit amount plus the interest earned.
Interest result row: This is the amount of interest you can expect to earn on each CD between when it is purchased and when it matures.
Avg/Year: This is the average annual interest earnings for each entered CD. For CDs with maturities of less than one year, the calculator will assume you will reinvest the principal and interest at each maturity date.
APY result row: Given the number of months and interest rate, this is the annual percentage yield (APY) of each certificate of deposit. APY (also know as Effective Annual Rate, or EAR) is a formula used by investors to compare one quoted interest rate with another -- because savings institutions like to quote their interest rates in ways that make them appear higher than they actually are. The APY formula allows investors to compare apples to apples -- regardless of the method used to quote the rates. In case you wish to double check the results of the calculator, here is the formula for calculating APY:
APY = (1 + r/n )n – 1 where r is the quoted annual interest rate and n is the number of times the interest is compounded per year.