If you want to make the most of your money by putting it in certificates without tying it up in one long term certificate account, certificate laddering is a great option for you! All it takes is just a little planning.

How Laddering Works

With laddering, you take out several CDs, all with different terms. Ideally, you want your CDs to reach maturity at regular intervals. That gives you the choice at each maturation date to either withdraw funds, renew them for a new term or withdraw some and re-invest the rest.

Here's an example: You might invest some of your dollars in a CD with a longer term, maybe as long 60 months. That CD comes with the highest interest rate possible. Next, you can invest more dollars in a CD with a slightly shorter term, say 48 months. You can also open CDs with terms of 36 months, 24 months and 12 months.

With this savings strategy, a new CD will reach maturity every year. So what should you do when that happens?

When your first CD matures after 12 months -- the CD that will pay the lower interest because of its short lifespan -- you can take out what money you need for expenses, purchases or other investments. Leave the rest of your dollars in it and then renew that amount into a 60 month CD.

What just happened? You gained access to the cash you needed and transformed the CD into a longer-term CD, earning more interest!

One year later, your second CD -- the one with an original term of 24 months -- matures. Again, you can decide to withdraw all your money, renew all of it or keep some and save the rest. If you are laddering, you should only withdraw some of your money and then save the rest for 60 months. Again, you've gained access to your money and transformed a low-yield CD into one that pays off far higher interest rates.

Each year, one of your CDs will mature, allowing you easy, penalty-free access to your cash. At the same time, you can store away whatever you don't use and generate higher amounts of interest.

You can ladder at shorter intervals and with fewer CDs, too. You can also have 6, 9 and 12 month CDs, which you renew once they mature.

When you ladder your money with CDs, you can safely invest your money while still having access to your cash when you need it -- or have the option to save even more down the line!

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