personal finance

CD ladder

A strategy of buying multiple CDs with staggered maturity dates to maintain liquidity while earning higher rates.

Example

“The CD ladder had six CDs maturing every two months providing regular access to funds.”

Memory Tip

LADDER — stagger the maturities. Always have a CD maturing soon for liquidity.

Why It Matters

CD ladders help people balance the need for accessible money with the desire to earn competitive interest rates. By spreading investments across different maturity dates, you can access portions of your money periodically without sacrificing returns or locking everything away for years.

Common Misconception

Many people think CD ladders require a large amount of money to be worthwhile, but you can build an effective ladder with modest savings by purchasing smaller CDs across different timeframes. Even with a few thousand dollars spread across multiple CDs, you gain meaningful liquidity benefits.

In Practice

Suppose you have 12,000 dollars to invest. You could buy four CDs of 3,000 dollars each with 1-year, 2-year, 3-year, and 4-year maturity dates. As each CD matures annually, you can reinvest that money in a new 4-year CD at current rates while having regular access to funds for emergencies or opportunities.

Etymology

Modern savings strategy — laddering maturities to access portions of savings regularly.

Common Misspellings

CD-ladderCD ladderingcertificate of deposit ladder

Related Terms

certificate of deposit savings account

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