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Certificate Laddering

Certificate Laddering: Save Smarter, Earn More

“Certificate laddering” means dividing the money you want to save into certificates with different maturity dates. Laddering can help you earn more without locking all of your money up for long periods of time.

There are two big reasons why people are hesitant to invest in certificates:

  • What if the interest rate changes?: When you buy a certificate, you’re locking in the present interest rate. But if interest rates go up after you buy the certificate, you’ll miss out on those extra earnings.
  • What if I need my money sooner?: When you buy a certificate, you’re agreeing not to touch your money until the end of its term. So if an emergency forces you to cash out early, you’ll lose some of the interest you’ve earned.
Laddering can help you with both of these questions.
Here’s an example: Larry has $5,000 he wants to save. He’d like to earn more interest than he can get from a traditional savings account. But he doesn’t want to lock up all of his money for a long time. Right now, his bank has a great five-year certificate rate. But Larry’s nervous that rates might go up after he buys a certificate.
Larry can use laddering to help him grow his savings. Instead of putting all his money in one five-year certificate, Larry splits it among five different certificates. The certificates mature between one and five years from now. This way, Larry avoids locking up all of his money in case interest rates go up or he needs some money sooner.
Money Invested Certificate Term Annual Percentage Yield (APY)*
$1,000 5 year 1.66%
$1,000 4 year 1.50%
$1,000 3 year 1.31%
$1,000 2 year 1.10%
$1,000 1 year 0.86%
*(All numbers are for example only and don’t reflect Christian Community Credit Union’s products or benefits. See our current rates.)
As each certificate matures, Larry can move the money and any interest it’s earned into a new five-year certificate. And if he needs to withdraw some money sooner than that, he won’t lose all the interest he’s earned on the certificates that he still has.

Your Ladder, Your Choice

Do you like the idea of laddering, but still feel nervous about needing access to your money?
You can create ladders with shorter terms. For example, you can build a smaller ladder of certificates maturing from between one to three months. As each certificate matures, you can roll the money over into a new three-month certificate. That way, you’re never more than a month away from your money. And you may still be able to earn more than you would with a savings account.
Laddering can help you build your savings with less risk and a healthy reward. Find out more about our certificates here.
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