Early Withdrawal

There's a word for this particular method of teenage birth control: parents.

Some accounts you can take money from—ie, make a withdrawal—any ol’ time. Other accounts say “hey you, if you agree not to touch this money for a certain amount of time, we will reward you greatly for it.” Think of CD accounts and retirement accounts—you’re not allowed to touch them, and you get greater benefits from keeping your hands off of it. Things like higher interest rates and tax breaks (for IRAs and 401(k)s) can be worth keeping your hand out of the cookie jar.

But, sometimes, we need the money now. When we break the rules of these “hands-off!” accounts to take money out before we said we would, it's called “early withdrawal.” Early withdrawal for a CD means you’re taking some money out before the maturity date. For retirement accounts, it means you’re taking it out before retirement age. Early withdrawal usually comes with a hefty penalty...otherwise, you wouldn’t be incentivized to keep your hand out of the cookie jar, like you promised.