A certificate of deposit usually offers a fixed rate in exchange for leaving money deposited until maturity. A ladder divides the total among several maturity dates.
Match rungs to needs
Tuition, a move, or a planned purchase can determine when each portion should become available.
Know the early withdrawal rule
Penalties vary and can reduce interest or principal in some situations. Emergency cash should remain more accessible.
Reinvestment is a new decision
At maturity, compare the renewal offer with current alternatives instead of accepting an automatic rollover without review.
Sources
- Federal Deposit Insurance Corporation, Certificates of Deposit.