Small Saver Certificate (SSC)

What Is a Small Saver Certificate (SSC)?

A small saver certificate (SSC) is a deposit savings account with a small minimum balance requirement or no minimum at all. Minor-aged children, as well as young adults, tend to invest in them. The certificates pay either a fixed rate of interest for a specific term or a variable rate that changes based on a benchmark such as LIBOR (the London Interbank Offered Rate). A penalty applies if funds are withdrawn before maturity.

Banks generally offer SSCs in small denominations, such as $100, $200, or $500. The annual percentage yield (APY) depends on the maturity term of the particular SSC. Interest on SSCs is often compounded monthly.

Key Takeaways

  • A small saver certificate (SSC) is a deposit savings account that requires a small minimum balance or sometimes no minimum at all.
  • The most common investors in SSCs are children or young adults.
  • SSCs pay either a fixed rate of interest for a specific term or a variable rate that changes as the benchmark that is used changes.
  • The most common terms of SSCs are three, six, 12, 18, or 24 months.
  • SSCs are not that common or popular, as investors typically choose to invest in certificates of deposit (CDs), which are similar financial instruments.
  • SSCs tend to help young individuals start saving before they move onto more complex investments, such as investing in stocks and bonds or using futures and options.

Understanding a Small Saver Certificate (SSC)

An SSC usually has a term of three, six, 12, 18, or 24 months. Some are slightly longer term, with 36-, 48-, and 60-month term maturities.

SSCs began in the early 1980s as a way to provide banks and thrifts with deposit vehicles with 18-month maturities. This helped them compete with 18-month money market funds that offered higher yields than shorter-term certificates. Moreover, it encouraged individuals to start saving for the first time with very small amounts.

SSCs are not particularly popular, but some credit unions still offer them. Banks and credit unions sometimes offer comparable rates vs. their certificates of deposit (CDs), with many savings account-like features. Once the account is opened, investors generally add to their SSC accounts when they see fit. Maturities tend to renew automatically into a similar certificate.

Banks and credit unions encourage SSC holders to set up recurring deposits, usually on a biweekly or monthly basis. Many charge no monthly fees and, like savings accounts, SSCs are federally insured.

In addition, some SSCs come with checking account-like features, such as mobile and online banking that allows easy investing, as well as paperless statements and photo deposits.

Watch Out for Automatic Renewals

When SSCs automatically renew, they may do so at a lower rate. Be aware of when they renew and at what rate. If your saver is ready, it may be more advantageous to move to a different instrument like a CD or a money market account.

Advantages and Disadvantages of a Small Saver Certificate (SSC)

SSCs help young people working their very first job get used to saving for set terms. Some who start saving with this vehicle eventually move to invest in CDs and other types of investments with higher minimums.

For this reason, SSCs allow banks to groom prospective long-term customers early. For example, some persuade young investors to watch interest rates, giving them the option to boost, or step up, the interest rate of a certificate once during a given term.

The downside, however, is that these certificates purposely start with a lower rate than they would otherwise. Also, it’s important to keep an eye on SSCs that automatically renew, as some may do so at lower rates.

Some SSCs are more competitive than others and pay rates similar to regular CDs with similar maturities. However, it’s sometimes hard to comparison shop, as not all banks and credit unions offer these certificates. Their rarity is not a significant disadvantage, as young investors can easily find CDs that will offer the same function and similar returns. CDs are offered by almost every bank.

SSCs usually help young individuals to manage money early and understand the benefits of locking up money to generate a return in the future. This is educational for young adults and helps them become savvier in their investments before they start purchasing stocks and other more advanced financial securities as they get older.

Can you withdraw money from a small saver certificate (SSC)?

Yes, but there will be a penalty to do so. Small saver certificates (SSCs) function like a certificate of deposit (CD) and must reach their maturity date to cash out without a penalty.

How do an SSC and a savings account differ?

While the Federal Deposit Insurance Corp. (FDIC) insures both accounts, a savings account is a more flexible instrument, allowing a certain number of withdrawals over a specific period of time, most commonly either monthly or quarterly. An SSC functions more like a CD with a set denomination and term.

Can you add money to an SSC?

Some institutions allow you to add money to an SSC after opening, but this varies. Typically, SSCs come in small denominations such as $100, $200, or $500, but owners can contribute more after opening.

The Bottom Line

SSCs are a great tool for teaching children and young adults the power of saving and compound interest with a low entrance threshold. While they may be used to build good habits, they don’t earn as much as other savings tools, such as CDs. They also may be harder to find. Many banks and credit unions no longer offer them. 

Article Sources
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  1. Federal Reserve Bank of Richmond. “Investments for Small Savers at Commercial Banks,” Pages 25–27 (Pages 2–4 of PDF).

  2. Federal Deposit Insurance Corp. “Insured or Not Insured?

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