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CD or share certificate laddering - piggy bank image

Even though share certificates (a.k.a known as certificates of deposit or CDs)) won’t get you the highest return on your dollar, they are pretty much guaranteed not to lose you money.  That’s because share certificates are federally insured up to $250,000 per account holder by either the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC).

One way to somewhat combat the low rate of return is to build a certificate ladder.  Instead of putting all your risk-free funds into one CD, you can put your funds into a series of CDs with differing lengths of maturity.  Here’s what you need to know.

What’s a certificate?

A share certificate (banks call them certificates of deposit, or CDs), is like a savings account where you can’t withdraw the money for a certain period of time. In return for agreeing to keep your money in a certificate for a longer period of time, your financial institution pays you a higher rate of return.

What’s a certificate ladder?

Certificate laddering is a simple concept: Divide the amount of money you have to save among certificates that mature at different intervals. As each certificate matures you can turn it over into a longer maturity certificate. In time, all your certificates will be earning a higher yield with a longer maturity. Because you have a certificate maturing regularly, you can always cash it in if you need the money.

A beginner’s certificate ladder

A common certificate ladder would be as follows: If you have $1,500 to invest, deposit $500 into a one, two, and three-year certificate. Each year when a certificate matures roll the principle ($500) plus the dividends (interest made over the year, which varies depending on the dividend rate) into a three-year certificate for a higher-dividend yields. Continue each year as your certificates mature, and reinvest them into a three-year certificate so all your money is earning a three-year rate.

If your starting with less you could invest smaller amounts into three, six, 12, or 12, 18, 24 month certificates. Again the same principle applies, as each matures reinvest it for a longer term certificate until all your money is earning the highest rate.

Depending on your financial goals you can ladder any way you want.

You can start to reviewing White Sands FCU’s share certificate rates and terms here.


  1. Rosemary Williams on September 15, 2017 at 10:54 am

    As we age and aren’t in great health, we are afraid of putting too much in longer term c.d,s is there any plan that would help.

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