Certificate Laddering: How to Make Your Money Work Harder
You’ve probably heard a financial expert advise you to “Make your money work for you!” If you use Certificates as part of your investment portfolio, you may wonder how you can apply that advice to your certificate strategy.
Many financially savvy Certificate investors opt to “ladder” their certificates in such a way that allows them to maximize their yields while ensuring they have access to their money regularly.
This article will define Certificate laddering and help you determine if the strategy will work for you.
What is Certificate Laddering?
Laddering is a strategy designed to help investors make the most of their Certificates without facing the penalties of early withdrawal.
It might seem complicated at first, but it is a viable option to make your money work while still allowing you to have access to it in shorter periods. By laddering, you can get the best return on your money but still use it as you need it.
How Does Certificate Laddering Work?
Laddering works like this: instead of putting all your money into one Certificate, split it up. First, decide the total amount of money you want to invest. For this example, let’s say you have $25,000 to invest in Certificates.
Because you want your money to grow at the best yield available, you might initially want to put the full $25,000 into one 60-month Certificate. Instead, you should set up a Certificate ladder and split your money into multiple tiers.
With $25,000, you would meet the minimum amount to open five Connexus Certificates. To take advantage of laddering, you would put $5,000 in a 12-month term Certificate, $5,000 in a 24-month term Certificate, and so on until you’ve allocated the full $25,000.
What are the Benefits of Certificate Laddering?
Because you now have five Certificates open, your money is available to you in increments, allowing you access to it without incurring early withdrawal penalties.
When the first Certificate matures in 12 months, you can choose to withdraw the funds or open a new Certificate with the money. If you don’t need the money right then, the best move is to reinvest it into the longest term and highest interest rate Certificate, so you can continue to earn dividends.
After another 12 months, your second original Certificate matures, and again you can decide to withdraw the money or reinvest it. If you don’t need the money at that time, you can open the longest term and highest interest rate Certificate since you will already have another Certificate maturing in just 12 months (the third original Certificate).
You can keep laddering in this way until you have all of your money gaining dividends at the highest rate — while still being available to you to withdraw on a routine basis. By laddering, your money will work hard while still being accessible.
Start Today with High-Yield Certificates
Making your money work for you is smart. One of the smartest ways to do that is to open high-yield Certificates with Connexus and then ladder your terms to maximize your yields and access. Start today by learning more about our Certificate options.