Are you planning for the future? If so, you’re probably thinking about what part investing should play in your plans. The thought of tying up a big chunk of money in a share certificate (or certificate of deposit/CD as they’re known in traditional banking) can be concerning. What if something happens and you need to access that money before the term is up?

Yes, investing can be risky, but investing in a share certificate is very low risk. You earn dividends (aka interest) at a much higher rate than a simple savings account. Unlike investing in the stock market, a share certificate guarantees a specific return on your investment no matter the market conditions. You just have to leave your money alone for the agreed-to term, and there are plenty of terms to choose from.

The challenge is that the best certificate rates have the longest terms, and you may not feel 100% comfortable tying up a large sum of money for a long term. On the other hand, sticking with a shorter-term certificate means getting a lower return on your investment. The answer? Laddering.

What is CD Laddering?

CD laddering, or, in the credit union world, certificate laddering, is pretty simple once you get the concept. Instead of putting your entire investment in a single share certificate, spread it out between a few different certificates with varying terms. For example, instead of putting $9,000 in one 5-year certificate, split your money up into a $3,000 1-year certificate, $3,000 3-year certificate, and $3,000 5-year certificate. While your interest rate won’t be quite as high as if you put all the money into the 5-year certificate, the blended rate of all three terms combined is still very good without tying up your funds for 5 whole years.

Splitting your investment into equal amounts isn’t the only way to build your ladder; it’s up to you how much money you’d like to put into each. Maybe you want a larger amount in the shortest-term certificate so you have more money available at the first maturity date. On the other hand, maybe you’ll decide to make the longest-term certificate the highest balance because it’s earning the highest return.

There isn’t one right answer. Your personal financial situation and what feels comfortable to you will determine what’s best for you.

My Ladder is Built, Now What?

You’ve invested your money in a handful of share certificates with maturity dates spread across the next few years. Now what?

First, hang tight. It’s important to leave your money alone until the certificate matures. You can’t deposit any additional funds outside of the grace period, and withdrawing some or all of the money early will incur penalties. But that’s the whole reason you built your ladder, so you can be confident that you won’t need to withdraw money early.

Fast forward in time to when your first certificate matures, what should you do? Once again, you’ve got choices. You can renew the certificate for the exact same term at whatever the current rate is, or you can withdraw the money and put it into a long-term certificate instead.

Let’s say your ladder started with a 1-year, 2-year, and 3-year certificate. Well, one year in, the first certificate is maturing, and the remaining certificates have 1 and 2 years left before maturity, respectively. At this point, you can convert the 1-year certificate to a 3-year certificate, and you’ll still have money becoming available every year. In another year, when your 2-year certificate matures, you can turn that one into a 3-year certificate as well. Then all three of your certificates will have 3-year terms (and 3-year rates to match), but staggered maturity dates so that one is maturing every year and your flexibility is maintained.

Where Do I Start?

Start with the first rung. You don’t have to build your whole ladder at once. It’s all about what works for your budget and will move you toward achieving your goals. You can get started with just one certificate and add more gradually until you’ve got your ladder fully built.

Ready to start? GOLD Share Certificates allow for terms ranging from 6 months to 5 years, and an incredibly low minimum deposit of just $500 across all terms. GOLD certificates offer:
• Guaranteed rate of return
• Short- and long-term investment options with terms from 6 to 60 months
• Low opening deposit requirement
• No setup or maintenance fees
• Dividends earned monthly and paid according to your preference*
• Federally insured up to $250,000 by the NCUA

*You can choose to reinvest your dividends back into your Share Certificate or have it paid out monthly, either as a check mailed to you or as an automatic transfer to another GOLD account.

Ready to get started? We’re here to help. Call one of our Member Service Representatives at 484-223-4200 and we’ll open your new certificates together. For the do-it-yourself types, log into your account through GOLD Online Banking, click “Account Services,” and choose “Open a Sub Account.”