Savings strategy: CD ladder

Accounts

Borrow

Insure

Advice

Banking

Lending

Services

Advice

Membership

Careers

Community

DE & I

This is part 2 of a 4-part series on investment strategies for CDs.

Getting the most out of your savings is two-fold. You can:

Maximize your earning potential with the best term and rate.
Keep your investment options flexible in case you need money for an unexpected expense.

A CD ladder is a strategy that could help you meet these goals.

With a CD ladder approach, you divide your money between multiple CDs with different terms. As each one matures, you can choose to continue your growth or use the money for something else.

How to start a CD ladder

Here’s an example of how a CD ladder could work for you:

Let’s say you start with $7,500 in your standard savings account. You’ll split that into three CDs with $2,500 each. Each CD should have different terms and you should open them at the same time. Ideally, each one would mature on a set schedule, like once every three months.

In a CD ladder, you will invest in multiple CDs with varying terms. The goal is to have CDs maturing at different times on a regular basis.

As each CD matures, you have a few options for your funds:

Re-invest in another CD with a similar term, or just let it automatically renew. This gives you a consistent investment and renewal period with CDs maturing on a predictable schedule.
Put your funds from each CD into long-term CDs, which generally have higher rates. Once those long-term CDs mature, you will have several that renew on a consistent basis.
Use the funds from your maturing CD on anything you need, like vehicle or home repairs, or other big purchases.

As each CD matures, you can either withdraw the money, let it renew, or reinvest in a longer-term CD to continue growing.
Earned interest in the graphic above is for demonstration purposes only. Actual interest earnings may vary.