Certificate of Deposit (CD)
You usually have to agree to keep the money in your account for a specified amount of time. If you withdraw it early you may be subject to a penalty. These investments are low risk and offer high rates of return.
Checking Account
An account where deposited funds usually move in quick turnover. Checking accounts often offer very low interest rates on balances.
Compounding
The process by which a deposit or asset can, not only earn interest, but also build continually on the new sums with additional interest. For example, if you have $500 deposited, and gain 2% interest ($10), the next cycle will see that you gain 2% interest but now on the new sum, which is $510. Your sum thereafter would be $520.20, and so on and so forth.
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- Finance Basics
