Certificate Laddering is an excellent way to ensure you earn the best rates possible and have money available to you regularly. It allows you to control the terms while getting the liquid availability you want.

For example, instead of opening one 5-year certificate for $25,000, open five certificates for $5,000 each for the following terms: 1-Year, 2-Year, 3-Year, 4-Year & 5-Year

As each certificate matures, you can either withdraw the funds to use as needed or renew into another 5-year term, as shown in the example.

Certificate Ladder Chart

Why should you consider laddering your certificates?

Referring to the example above, 20% (or $5,000) of your original $25,000 certificate (plus the accrued dividends for that certificate) is available to you each year. By renewing each maturing certificate into a 5-year certificate, you'll be earning a higher rate than if you'd simply continued with another 12- or 24-month certificate.

The strategy works to your advantage because after a few of your certificates mature and are renewed into another 5-year certificate, you'll be earning the highest rate and have a 5-year certificate maturing every year. Having a certificate mature every year doesn’t lock you in for too long if rates should go up during the term of your certificate.

Laddering can provide you with a steady and more stable source of savings than a single-certificate investment. The best part is, you can always add funds to your certificate at maturity and watch your savings grow.

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