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Laddering: Understanding the Ultimate Certificate Strategy

Laddering: Understanding the Ultimate Certificate Strategy

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It's safe to say that most people are seeking a secure and efficient way to maximize their savings. If you are alright with locking up your money for a duration, a certificate is an excellent tool to guarantee returns on your savings.

One of the best ways to earn even more income from your certificates is through laddering. Keep reading to get the full breakdown of certificate laddering and how it can boost your earnings.

What is Laddering?

Laddering is a certificate savings strategy that helps you take advantage of the best rates possible without relinquishing access to all your savings. It involves opening multiple certificate accounts with different maturity dates, allowing you to take advantage of variable rates without locking up all your money in one certificate.

How to Build a Certificate Ladder

Ready to build a certificate ladder of your own? To illustrate the concept, let's say you have $5,000 to save. Here's how you would create a certificate ladder to maximize your returns:

Step One: Open Separate Certificates

To ladder certificates, a person will divide a sum of money into equal quantities and open several certificates with different maturity dates. Most people tend to open certificates with different term lengths that mature at equal intervals, such as every six months or every year.

For the sake of our example, let's say you decide to open five certificates with $1,000 face value each. If you open certificates with six-month intervals, your ladder will look like this:

  • $1,000 in a six-month certificate
  • $1,000 in a one-year certificate
  • $1,000 in an eighteen-month certificate
  • $1,000 in a two-year certificate
  • $1,000 in a thirty-month certificate.

Step Two: Renew at Maturity

When a certificate reaches its maturity date, you can withdraw the savings or renew it for another term. Renewing each certificate at maturity allows you to maintain sequential maturity dates and compound your savings.

Back to our example: Your first certificate is a six-month certificate. When this certificate matures, you will renew the certificate for a longer term. Let's say the new term is four years in this case. When every other certificate renews, you will also renew them for four years.

  • In six months, renew the certificate as a four-year certificate
  • In one year, renew the certificate as a four-year certificate
  • In eighteen months, renew the certificate as a four-year certificate
  • In two years, renew the certificate as a four-year certificate
  • In thirty months, renew the certificate as a four-year certificate.

Why Laddering is a Good Investment Strategy

Building a certificate ladder is a great investment strategy for those who want to maximize certificates' guaranteed returns. Certificate ladders allow you to leverage high rates on longer-term certificates and still have your cash become available to you at frequent intervals. You get to decide how much money you save, how long you want your money to sit in a certificate account and whether it should be reinvested.

Take advantage of Apple's competitive certificate rates today. To start building your certificate ladder, go into Apple FCU Online or Mobile App. Simply tap Add a Product, then Certificates to get started!1

You can also call us at 703-788-4800, schedule a video appointment or visit a branch to open your account today.

Not a member yet? Join now.

1Commercial Certificates must be opened in person or by calling 703-788-4800.


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