What, you mean my whole Backstreet Boys collection hasn't increased in value? Actually Anna, in money terms, a "CD" is a Certificate of Deposit. A Certificate of Deposit is a certificate issued by a bank indicating that a certain amount of money has been deposited in it for a set period of time. It also tells you how much interest you will earn. CDs are generally a very low-risk, steady investment because the extra money you get back, or the interest the bank will pay you for using your money, is set ahead of time and guaranteed by the bank.

Usually, the longer you agree to leave your money in the bank, the higher your interest rate will be, meaning that you'll get back more money over time!

Back in the 1980's, some parents were earning over 13 percent interest investing in CDs, but interest rates for loans and mortgages were sky-high too. When interest rates go up, you can generally earn more interest on your investments, but you'll pay more interest if you need to borrow money to buy a car, a home or anything else on credit. When interest rates go down, you'll earn less on your investments but you'll be able to borrow money at a lower rate, saving you money on interest you'll pay.

CDs are called "term investments," meaning investing in a CD ties up your money for the length of time spelled out in the terms of the CD itself. If you take your money out of the bank early, you pay a penalty for doing that, sometimes up to 10 percent or more! Other ways to save in the bank are money market accounts and traditional savings accounts. They pay a lower interest rate, but you can get at your money easier if you need to.

Before making any choice about how to save, think carefully about your own situation, the amount of money you have to put in and your long-term financial goals. Do only those things that will help you reach your goals. Oh yeah, and by the way, music CDs are a lousy investment!

Did You Know?

Klass Compaan, a Dutch physicist, came up with the idea for the Compact Disc in 1969. However, it wasn't until 1983 that the CD was introduced in the United States.