Climbing the Money Ladder
Learn how building a certificate ladder can help you save for your goals.
Reach your goals with a certificate ladder
Saving with a certificate account
Whether you’re saving for a college education or down payment on a house, a certificate account is a great way to save for your future. You can choose a term ranging from three months to five years. The longer the term, the more you can typically earn. By building a ladder of certificate accounts, your certificates will mature at different times. This guarantees access to your money at different intervals. That way, if you need cash you won't pay an early withdrawal penalty.
A Certificate ladder is a savings strategy where you open several Certificates with staggered terms. This allows you to take advantage of higher rates on longer-term Certificates while still having periodic access to some of your money.
Let’s say you have $6,000 in your savings or Money Market Account that you don’t plan on using during the next few years. Follow these steps to build a Certificate ladder.
Step 1:
Open three Certificates that mature in staggered one-year increments:
- Open a 12-month Certificate with $2,000
- Open a 24-month Certificate with $2,000
- Open a 36-month Certificate with $2,000
Step 2:
When each certificate matures, renew it for a 36-month term:
- Renew the 12-month Certificate for a 36-month term
- Renew the 24-month Certificate for a 36-month term
- Renew the 36-month Certificate for a 36-month term
Step 3:
Continue to renew your Certificates following step two. Using this example, you will have access to a third of your savings every year while earning the higher dividends that are often paid on longer term Certificates. With this strategy, you can match the terms and maturities to your needs and comfort level while earning more than you would with a regular savings account.
Typically, you can earn more on Jumbo Certificates. These are Certificates with higher balances and often require a minimum balance of $100,000. Terms and features may vary so it’s important to do a little research and ask questions to determine what works best for you.
The more Certificates you open, the higher your ladder will climb.
Helpful tip
If you're building your credit, a Certificate can be used to secure a loan. A Certificate Secured Loan is a Personal Loan that allows you to use the funds in your Certificate as collateral.
