How Certificate Laddering Works

You purchase multiple certificates with different maturity dates, and reinvest each one as it matures for the longest period. That way you'll have access to part of your funds at shorter intervals while still taking advantage of the interest rates offered on longer-term certificates.

3 Easy Steps

1. Specify the total amount of the funds that you have to invest.
2. Determine the amount you need to have liquid. This is the amount that will be available at shorter periodic terms. Remember, generally the more that is liquid the less that amount will earn.
3. Select your liquidity period. A liquidity period of six months means every six months you will have a certificate maturing.

For example, when you have $10,000 to invest and feel comfortable having access to $2,500 every six months, you buy four $2,500 share certificates, with terms of six-, twelve-, eighteen-, and twenty-four months. When your 6-month certificate matures, you roll it over into a 24-month certificate, and so on. This way, you get most from your money in higher-yielding certificates and every six months one certificate matures, so you have access to part of your investment should you need it.