Knowing your milestones can help you determine what term lengths might suit you best. Do you, for example, foresee any major expenses coming up next year? Maybe you have a personal goal, such as purchasing a new car in five years or owning your home in ten.

Identify your goalsīefore embarking on any CD ladder strategy, it’s important to understand your goals and current finances. Now let’s look at how to build a CD ladder and some helpful tips for getting the most out of this potentially useful savings method. Because you know when each CD is set to mature you can plan accordingly if you need access to cash or wish to renew the CD for savings growth. When reinvesting money from short-term CDs, you’re moving the principle plus accrued interest into a new CD, ideally with a longer term and higher interest rate, compounding your interest earned over time.Ī CD ladder can be useful for saving towards long-term goals while providing semi-regular access to deposited funds. Each time a shorter-term CD matures, you can mobilize those funds for personal financial goals or choose to reinvest them into a new CD with a longer term. This provides flexible access to savings through shorter-term CDs while leveraging the generally higher interest rates of longer-term CDs. The idea is to split your money into several CD accounts with staggered term lengths. With a CD ladder, you may be able to leverage the higher interest rates offered by longer-term CD accounts while maintaining periodic access to your money. Let’s learn more about this potentially valuable tool. A CD ladder is a savings strategy that splits your money across multiple CD accounts with varying term lengths. Some financially savvy savers are turning to a savings strategy that might give them the best of both worlds: a CD ladder. A certificate of deposit (CD) account may offer higher interest rates than a standard savings account, but, if you need to access your money before the CD term is over, you may receive an early withdrawal penalty fee.

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