Bonds and CDs

A bond is a way to loan money and receive the principle amount invested and an interest payment. Bonds are a great way for teens to quickly grow their savings without risk!

Bonds: Main Points

Low Entry Point

Many bonds have a relatively low minimum investment amount, which can make them accessible to anyone starting in their savings journey.

Fixed Income

Bonds provide a fixed income stream in the form of regular interest payments, which can help learning about the concept of passive income and the benefits of investing for the long-term.

Security

Bonds are generally considered to be a low-risk investment, particularly if they are issued by a reputable company or government agency, providing a level of financial security

Education

Investing in bonds can be a valuable learning experience for teenagers, as it can help them understand how financial markets work and the benefits of saving and investing for the future.

What are bonds good for?

What types of bonds exist?

What are Certificates of Deposits?

Bonds are fixed-income securities, therefore they pay at regular intervals. They are known for their low risk, meaning that they comprise a large portion of conservative portfolios. If you are getting into investing and do not want to risk your money, bonds are a great way to grow your wealth.

U.S. Treasury Bonds

Risk Level: Low
Explanation: U.S. Treasury Bonds are considered one of the safest investments globally because they are backed by the U.S. government, which has a virtually impeccable credit rating. They have minimal default risk, making them a low-risk option for investors.

Corporate Bonds

Risk Level: Moderate to High
Explanation: Corporate bonds can vary widely in terms of risk depending on the creditworthiness of the issuing corporation. Bonds from financially stable and established companies typically have lower risk (investment-grade bonds), while those from riskier, lower-rated companies (junk bonds) carry a higher risk of default.

Municipal Bonds

Risk Level: Low to Moderate
Explanation: Municipal bonds generally have low default risk, especially when issued by financially stable municipalities. The risk can vary depending on the issuer's financial health and the specific revenue stream backing the bond. Bonds backed by essential services like water or sewer utilities tend to be lower risk.

High-Yield (Junk) Bonds

Risk Level: High
Explanation: High-yield bonds, also known as junk bonds, carry a high level of risk due to their lower credit ratings. They are issued by companies with weaker financial positions and are more likely to default on their payments. Investors are compensated for this risk with higher interest rates, but the potential for loss is greater.

A Certificate of Deposit (CD) is a type of financial product offered by banks and credit unions that allows individuals to deposit a specific amount of money for a predetermined period at a fixed interest rate. CDs are considered low-risk, interest-bearing savings instruments. Essentially, you are giving some amount of money to the bank, and you are not allowed to withdraw those funds. You will receive regular interest payments on the money you deposited, and will get your money back at the end, when CD "matures."