Savings strategy: CD barbell

This is part 3 of a 4-part series about investment strategies for CDs.

If you’ve ever been to a weight room, or even watched cartoons as a kid, you’ve seen a barbell. Equal amounts of weight on each side connected by a metal bar.

Now imagine this as a strategy for growing your savings. That’s what a CD barbell is: a balance of short-term flexibility on one side and long-term growth potential on the other with nothing in between.

Let’s look at how a CD barbell could work for you.

The CD barbell in action

More specifically, the CD barbell includes putting half of your investment into a short-term CD and the other half into a long-term CD with nothing in the middle. That’s how you balance flexibility with earning potential. You can also use this strategy to help you meet two separate savings goals with different timelines.

So, let’s say you have $10,000 to invest. You could put $5,000 in a 12-month CD, and the remaining $5,000 in a 30-month CD. Typically, with some exceptions, the longer the term, the higher the interest rate.  

A CD barbell is a mix of short-term CDs and long-term CDs, with nothing in the middle.

Your long-term investment is in for the long haul and will result in some satisfying growth for your savings. But when your short-term investment matures, you’ll have a few options.

Your short-term CD has matured. What's next?

1. Renew your CD

The easiest option is to simply let your short-term CD renew and continue growing for another term.

2. Re-invest it in a long-term CD

When your short-term CD matures, take another look at rates across the board. It could be a good time to roll your money into a long-term CD with a higher rate.  

3. Withdraw your money

Life comes at you fast. If an expense comes up, you can use the money from your matured short-term CD to help pay for it.

Start your CD barbell today

With an equal balance of long-term growth potential and short-term flexibility, it’s easy to see why the CD barbell is common strategy among CD savers. Achieve your savings goals with a Veridian CD.

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Read more from the CD Savings Strategy Series:

Part 1: CD Savings Strategy OverviewPart 2: CD LadderPart 4: CD Target