Many people don’t know they can use certificates to their advantage by creating a “ladder.” To complete a ladder, look at how much you can invest in certificates. For example, if you have $10,000 to invest, you may put 25% in a 60-month certificate, another 25% in a 36-month certificate, and so on. Once each certificate matures, you reinvest this money into additional certificates of various lengths, depending on the interest rates in the market at that time. Suppose the available APY for certificates decreases substantially. In that case, you can take some of the money once the term is up and place it into a savings account, Roth IRA, or any other place of your choosing. You can reinvest that money in a certificate later when rates have risen again. A certificate ladder is a strategy for saving that allows you to earn significant interest without tying up a large sum of money indefinitely. It gives you more flexibility with your certificates by allowing access to some of your investment money sooner with your shorter-term certificates.
Additionally, if you’re worried about APY fluctuating too much, a ladder can be a great strategy to allow you to take advantage of higher APY rates with your longer certificates. At the same time, you can reinvest your shorter-term certificates if the APY increases or remove the funds if the APY decreases. It’s also safer than other saving strategies because the financial institution insures your certificates.