What is CD Laddering?
Certificates of Deposit or CDs offer a unique financial opportunity. They give higher interest rates than CDs and let you choose the amount of time to keep them in the bank. The more time you are willing to have limited access to your money.
CD Laddering is a technique to maximize your money while still having frequent access to at least part of your money. The basic idea is to take an amount of money and split it into equal amounts to invest into timed CDs. For example, you have $10,000 dollars to invest. You split that money into five separate amounts of $2,000. You invest in one-year, two-year, three-year, four-year, and five-year CDs. As each amount matures, you reinvest it as a higher interest five year CD. In this way, you have continually maturing five year CDs, with one chunk of your money always within reach.
Some things to keep in mind with CD laddering are that interest rates will change with current economic shifts. Invest during an economic downturn to reap rising rewards. While longer term CDs will give you better rates, you may be more concerned with frequent access. In this case, you can also invest in monthly or semi-annual CDs. Finally, this method will not be as profitable as simply investing all your money in 5 year or longer CDs, but the advantage is easy access to part of your investment at all times. Consider whether CD laddering might be an effective financial method for you. Let Springfield Banking Rates help you find the most current and competitive CD rates.
