Often used to elevate you for specific jobs or remodeling projects, a ladder can be an essential tool. A CD ladder may also be used to help elevate you, but in a much different way.
It’s important to first understand what a Certificate of Deposit (CD) is and how it differs from a traditional savings account before discussing CD laddering. A secure way to save, a CD is a savings product that allows you to lock in guaranteed returns while earning more than most traditional savings accounts. You choose your CD term length and open your CD with $1,000 minimum, lock in your rate for the specified term that you prefer, and watch your money grow.
Read more about CDs by reading, “Are CDs a Good Place to Put My Money?”
CD laddering, an effective savings strategy, is the process of spreading cash across various CD maturity terms and rates.
What Are the Benefits of a CD Ladder?
When utilizing different CD rates and length of terms, you’re able to have more liquidity, in between varying CD maturities, while leveraging the best CD rates available from a reputable financial services provider, like First Bank. After each CD reaches its assigned maturity length, you can choose whether you’d like to reinvest into a new CD or simply withdraw and utilize the funds.
Another benefit of CD laddering is that you aren’t as likely to withdraw funds early from your CD, saving you from early withdrawal penalties.
How Do I Create a CD Ladder?
If you’ve saved up a sum of money or receive funds from a work bonus or inheritance, you may want to consider creating a CD ladder to securely grow your money.
For example, if you have $10,000, you may not want to lock the full amount into one longer-term CD, so you will want to build a CD ladder. If you open one CD with $4,000 for a 3-month term, that leaves you with $6,000 to put into other CDs. Simply split the remaining $6,000 in $2,000 increments into a 7-Month CD, 13-Month CD, and 20-Month CD. By doing this, you are creating a CD ladder to still have access to your funds at different intervals while also maximizing your savings.
If you have questions about Certificates of Deposit or CD laddering, contact us. Start planting seeds for the future by opening a First Bank CD online today.
