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Certificate Laddering

What is "certificate laddering” and why could it be a good idea?

“Laddering” means buying several certificates at once for different terms. Laddering your certificates can allow you to increase your liquidity while taking advantage of higher rates. Certificates for longer terms like 60 months usually have higher rates than shorter term certificates.

Start by buying several savings certificates at one time, each with a different maturity date. Each time one of your certificates matures, you can roll it over into a new certificate with a longer term and higher rate.

For example, if you have $10,000 to invest to start, you can purchase five $2,000 savings certificates:

  • Certificate #1 for a 12-month term
  • Certificate #2 for a 24-month term
  • Certificate #3 for a 36-month term
  • Certificate #4 for a 48-month term
  • Certificate #5 for a 60-month term

When the 12-month certificate matures, roll it over into a 60-month certificate, and do the same as the 24, and 36 and 48=month certificates mature.

In only four years you will have a 60-month certificate maturing every year. That way, you have access to cash every year as a certificate matures, but can take advantage of higher interest rates on 60-month certificates.

This ladder will work with different terms or different amounts to best meet your financial goals.

For more information about certificate options at your credit union, please contact Member Services at (804) 323-6800 or (800) 285-6609.