The certificate of deposit, called a CD, is one of the most looked over investment vehicles in the world. Because of their low risk and lack of variability, they are rarely mentioned by financial analysts. They are simply not exciting.
In an economic period where many people are reverting to cash under the mattress, maybe it is time for sensible people like you to look at CDs.
I have had CDs for as long as I can remember. I generally have had a handful of 3 month, 6 month, and 1 year CDs as temporary storage for my latent cash to earn extra income.
CDs will give you a higher rate than a bank savings account. This is beneficial to the bank because the money is locked in, and it is beneficial to you because you have a higher rate.
Like savings accounts, CDs are FDIC insured up to $250,000 (just increased from $100,000. If it is a joint CD between two people, that jumps to $500,000. Talk to your banker about details.
Local banks usually have pretty good rates too, but shop around before you invest. For zero risk up to $250,000, this is generally a pretty good deal. If you have school or a big purchase looming in the future, a CD is a good option to keep your cash in while waiting for the big day.
If you are worried about your IRA or 401k, most allow for CDs as an investment option in addition to stocks, bonds, and regular bank accounts.
For rate details, go to bankrate.com.
For more on CDs, check out this blog post at Investing School.