Learning how to build a CD ladder is a great step for anyone looking to get more out of their savings. And even if you're new to financial planning, you can keep your CD ladder simple and organized by following a few easy tips.
Remember, CD laddering is a strategy where you open multiple CDs that mature at different times. Each time a CD matures, you have the option to access that money or put it in a new CD on the same term.
For example, let's say you want to put $20,000 into a CD. Instead of putting all that money in one, high-yield four-year CD, you might put $5,000 into four different CDs; a four-year, a three-year, a two-year and a one-year.
When the first CD matures, you can put in another four-year CD, repeating the process with the others as they become due. That way, you can have periodic access to your money if you need it while still keeping some money in high-yield, longer-term accounts.
The trick with getting the most from your CD ladder is staying on top of when your CDs mature. By law, your bank must notify you before your CD is mature, but if you want to add an extra measure of planning, here are a few strategies to keep it simple.
Use the Internet
These days, just about every bank has some form of online access, but not all are as customer-friendly as Ally. On our website you can open and manage your CDs easily, and if you ever have any questions you can call us 24/7 at 1-877-247-ALLY (2559) or chat with us online. We don't like to toot our own horn too much, but we're thrilled that Allybank.com received the top ranking in a survey of banks by the Change Sciences Group.
Automate Your Reminders
Just about every Smartphone, e-mail client and computer has a calendar. The next time you open a CD, set up a reminder in your calendar that will pop up a few days before your CD is due. That way you'll have plenty of time to decide if you want to take your money out or put it in another CD.
Put It on Paper
Maybe you're more of a visual learner. If so, take out a pen and paper and draw an actual ladder showing each CD you have, its interest rate and when it's due. DepositAccounts.com has a great example of an illustrated CD ladder that makes it easy to keep track of your different accounts.
Start Your Ladder Small
If you're just getting started with a CD ladder, remember that you can start with any number of CDs that you're comfortable with. Maybe it's just two or three. The goal is to get comfortable with the CD maturing process. Once you've got it down, and you're ready to build upon your ladder, you can always open up new CDs.
Ally Bank offers CDs in a wide range of terms so you can build a CD ladder that best suits your needs. Whether you're interested in our High Yield CD, No Penalty CD or Raise Your Rate CD, we're confident that you'll find an option to help you meet your savings goals.