5 Smart Uses for Your Washington, DC, Share Certificate

Established in 1935, PenFed today is one of the country’s strongest and most stable financial institutions with over 1.4 million members and over $19 billion in assets. Serving all 50 states and the District of Columbia, as well as on military bases in Guam, Puerto Rico and Okinawa, PenFed is federally insured by NCUA and an equal housing lender. 

Whether you’re planning to move to the District of Columbia or you already are a resident, be prepared for higher living costs. According to USA today, living comfortably in the District requires a household income of at least $108,092, so it’s no surprise that the nation’s capital is listed as one of the richest cities in America.

Living in an expensive city can be tough. The more you spend trying to survive, the harder it is to plan and save for the future. If you rely on a regular savings account to build your personal net worth or even an emergency fund, you might never hit your goals. You need a better option — a District of Columbia share certificate.

What is a share certificate?

Share certificates are similar to a certificates of deposit, except offered by a credit union instead of a bank. A share certificate acts as a savings account, in which you leave money in the bank for a set length of time. “A CD is a nice avenue for people to look into when [they are] trying to save up for a milestone of some sort but do not want to take on any risk,” said David Hryck, a New York City tax lawyer and personal finance expert.

Share certificate rates are based on the length of the share certificate, or the term. “All share certificates have a fixed “term,” which is the number of months or years it will take to reach maturity,” explained Erica Cheung, director of treasury at Pentagon Federal Credit Union (PenFed).

For example, if you opened a one-year certificate of deposit with PenFed in the District area, you could earn an interest rate of 1.70% APY. The credit union requires a $1,000 minimum deposit, with which you’d earn $12.07 in interest. “The longer the term, the higher the dividend rate,” said Cheung.

Here are five ways you could strategically grow your savings with a share certificate offered by a financial institution in the District.

Read: 11 Best Credit Unions for CD Rates

1. Home Purchase

Unless you qualify for a Virginia home loan, buying a house requires a minimum down payment between 3.5 percent and 5 percent for an FHA or conventional mortgage loan, respectively. Opening a share certificate in the District can grow your down payment fund and could help you purchase a property sooner. The money in your account could go toward your down payment and closing costs, and if you have any funds left after paying mortgage-related expenses, you can put the cash toward furniture or renovations.

2. Buy a Car

Whether you’re looking to pay cash for a car or save for a down payment, a share certificate can help you get closer to your goal. Opening a share certificate can jump-start your car fund, and if you time your savings plan and car purchase in advance, it can provide the cash you need when you need it.

Paying cash for a car means you don’t have to worry about your credit score, interest rates or monthly payments. If you apply for an auto loan, making a large a down payment can reduce the amount you need to finance and can lower your monthly payment.

Related: 20 Things You Should Know About Saving Money in Your 20s

3. College Education

College can be expensive, and it’s not getting any cheaper. According to the College Board, “the average cost of tuition and fees for the 2015-2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities.”

If you’re thinking ahead and starting a college fund for your kids, a share certificate can take your saving efforts further than a regular savings account. Share certificates offer beneficial savings rates and dividends you could use to pay for your child’s educational expenses.

4. Family Vacation

Perhaps you’re coming up on a milestone wedding anniversary or you want to take a trip with your family. Whichever it may be, a share certificate with a District-area financial institution could get you to your dream destination more easily. Whether you’re planning a big vacation next year or three years from now, deposit vacation funds into a share certificate and watch your money grow faster — and be protected from early-withdrawal temptations.

5. Wedding Expenses

A wedding isn’t going to pay for itself, so the sooner you start pinching your pennies, the better. From buying a dress to picking a venue, everything about planning a wedding is expensive. According to the 2014 Real Weddings Study, the average cost of a wedding in 2014 was $31,213, which might be more than you expected for the big day.

If you want to increase your wedding fund over the next year or so, open a share certificate and earn dollars in interest instead of pennies. “If you’re looking to grow your savings and don’t want to take on much risk, putting your money into a share certificate is a safe financial bet,” Cheung advised.


Keep Reading: 10 Best CD Accounts of 2016

About the Author

Valencia Higuera is a personal finance expert who enjoys articles on budgeting, saving money and credit cards. She holds a B.A in English from Old Dominion University and currently lives in Chesapeake, Virginia.