How 6-Month CDs and Other Ideas Can Help You Plan for Major Family Gifts

It's Never too Late to (Re)Learn to Save.

September 2012

While some of the money management skills you need in life should be learned at an early age, some of us aren't as financially literate as we could be. Fortunately, it's never too late to introduce — or even reintroduce — the basics of saving to your family.

For some, starting with a goal in the 6-month time horizon is just long enough to create a healthy tension that connects short-term sacrifices to longer-term goals.

For example, let's say you're planning a family vacation. Of course, you'll need to determine the amount you want to set aside. You probably want to earn the most interest you can while waiting out those six months. But are 6-month CDs the best solution?

6-Month CDs: The Pros
Naturally, 6-month CDs come to mind because, generally, they offer great rates compared to other Federal Deposit Insurance Corporation (or FDIC)-insured deposits. Plus, the early withdrawal penalty that comes with CDs is motivation to leave the money alone until you need it. Finally, when you choose an Ally Bank High Yield CD with a 6-month term, the daily interest compounding helps your money grow faster. Some banks only compound weekly, monthly, or even annually.

Your growing balance can provide additional motivation to stay on track. You can explain to your children, for example, that the interest you've earned in a given month is enough interest to cover some tangible part of the vacation — gas for the rental car, your first meal out, or some other expense.

So overall, 6-month CDs in this case might make sense.

6-Month CDs: The Cons and One Alternative at Ally Bank
Let's face it: 6-month CDs don't always pay the best annual percentage yield (APY) in the market.

Instead of that motivational early withdrawal penalty that stands between you and a goal-wrecking decision, you can withdraw money from an Ally Bank Online Savings Account an unlimited amount of times with an Ally Bank Debit Card. In addition, other types of withdrawals are limited by federal regulation to 6 times per statement period. All of these withdrawals come without paying a fee. But if you don't maintain the willpower it takes to keep the money in the bank, a potentially better annual percentage yield (APY) may not make a bit of difference.

On the other hand, you generally can't add money to 6-month CDs, but you can deposit money into an Online Savings Account as often as you like. Making regular, modest deposits sometimes proves to be more effective for reaching savings goals compared to a single, large deposit.

6-Month CDs vs. Other Options: It Doesn't Have to be Either/Or
While you may not earn the same APY with 6-month CDs that you would with another option, there's no rule that says you have to choose one or the other.

Maybe you put your vacation airfare into a 6-month CD to make it harder to spend. And for the rest of your savings, you might use another Ally Bank savings option while you add to the money until you're ready to use it.

Regardless of the path you take, Ally Bank is here to help make it easy and rewarding to reach your savings goals. Learn more by chatting with live customer service at, or by calling 877-247-ALLY (2559), where knowledgeable customer service is also available 24/7.

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