Certificate account laddering is a great strategy to avoid putting all of your eggs into one basket.
Consider this example of opening five $5,000 certificate accounts instead of one $25,000 certificate account:
- Year One: Open 5 certificate accounts, each for $5,000 for 1, 2, 3, 4, and 5-year terms.
- Year Two: When the 1-year comes due, open another 5-year.
- Year Three: When the 2-year comes due, open another 5-year.
- And so on, so that you essentially have a certificate account maturing every year.
With the above strategy or "ladder", you’ll have access to some of your money at shorter intervals while still being able to take advantage of higher interest rates offered on longer term certificate accounts. You can also avoid unnecessary penalties that occur from cashing out longer-term certificates before maturity. If you need quick access to your funds, you’ll have an account maturing every year that you could choose to reinvest or put into a checking or savings account.
Our certificate account ladder calculator examines the benefits of investing in a series of staggered maturities to help you achieve better liquidity in case of emergency or projected need.
Certificate Account Ladder Calculator
(if the calcualtor does not load fully the first time you click the link, please close it and reopen.)
Did you know? CDs vs. Certificate Account –
Banks have CDs (Certificates of Deposit) and we have Certificate Accounts. Similar product, different name.