Many savers have found the best way to maximize their overall returns on certificates of deposits (CD’s) is to build a “CD Ladder”.

CD Ladders help insultate you from interest rate fluctuations, and help you maintain your savings dicipline while also providing liquidity.

A CD ladder is made up of several Certificates of Deposit which can all be opened at the same time or staggered, and have different lengths of maturity and interest rate yields. A Certificate of Deposit CD ladder can help you earn an even higher return on your savings over time as each step on the ladder represents a different CD term. For example, a long term CD ladder could include 12, 24, 36, 48 and 60-month term CDs. Comparitively, a less aggressive CD ladder can consist of shorter terms – for example, a 6, 12, 18, 24 and 30-month ladder which keeps your money more readily available.

Building a $10,000 CD Ladder

For example, if you have $10,000 to invest and want to start a 5 rung, annual ladder (12, 24, 36, 48 and 60-month CDs), you could invest $2,000 in each term. As each CD matures, you would automatically re-invest the principal and interest into the longest term on your CD Ladder (in this case a 60-month CD). With this scenario, you’ll have the security of at least $2,000 becoming available each year in the event you need access to some of your money, while at the same time having all your money in longer term CDs, which generally pay a higher rate of interest than shorter term CD deposits.

Why Invest in Certificates of Deposit in the First Place?

Certificate of Deposits (CDs) are a low-risk method of putting your money to work for you. If you have a checking account with more money in it than you need and you can afford to set some money aside, than there really isn’t a reason you wouldn’t want to try investing in CDs.

Many checking accounts and savings accounts provide very little interest, or even no interest at all. This means your money is just sitting in an account not working for you. A good way to have your money work for you is by investing a portion of your money in certificates of deposit (CDs). CDs will allow you to set a chunk of money aside for a certain period of time (usually at least 6 months) and receive a higher interest rate than you would receive with a checking or savings account.

Some savings banks let your CD’s default to roll over automatically for the same term. To optimize and extend the life of your CD ladder, simply change the maturity instructions for each CD to roll-over to the longest term of your CD ladder (like the 60-month CD in the example above).  To learn more, check the CD rate tables at RateNerd.com

Related posts:

1. What Obama’s FDIC Extension Means for Your CD Ladder
2. 3.20% APY 60 Month CD Rate For Your CD Ladder – Daily Deal!
3. 2.05% APY on 9 Month CD, 2.30% APY on 12 Month CD – Daily Deal!
4. 3.25% 5 Year Certificate of Deposit CD Rate – Daily Deal!
5. CD Rate of 2.05% on 9 Month Certificate of Deposit – Daily Deal

Tagged as: bank cd, CD Ladder, cds, certificate of deposit, high interest, high interest savings, high-yield

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