With a multitude of investment options available, one popular option is a certificate account, or CDs. It’s an easy way to earn compound interest, especially now that savings rates are rising!

What are CDs or Certificate Accounts?

A certificate account allows you to invest your money for a specified time period (typically ranging from 1 to 5 years). However, you are not allowed to withdraw your money during the term without incurring a penalty.

You usually receive a higher dividend rate versus traditional savings accounts in exchange for having your money “locked-in” during your term. Furthermore, certificate accounts offer guaranteed returns without risk since the National Credit Union Administration (NCUA) federally insures all accounts up to $250,000.

One feature of CDs that can make people hesitate is that their money is locked into the account for the entire length of the term. So, you cannot withdraw the money before the maturity date without incurring a penalty. Depending on when the funds are taken out, this could be more than the interest earned. One way to get around this factor is by “laddering” your certificate accounts.


What is Laddering CDs?

Laddering is an investment strategy where you invest money in multiple certificate accounts over a variety of terms. For example, imagine you have $10,000 to invest. Instead of putting all your money in one 5-year certificate, you could split it up like the example below.

Single Investment Laddering Investments
$10,000 (5 year certificate) $2,000 (1 year certificate)
$3,000 (3 year certificate)
$5,000 (5 year certificate)

This process allows you to gain access to some of the money in your certificate accounts at different times. When the money is available after the term is up, you can reinvest it or use it. In contrast, if you put all your money into one 5-year certificate and rates dramatically increase in 3 years, you would have to wait 2 more years to reinvest it. You would already have funds maturing and be able to take advantage of the higher returns with the laddering strategy.


How Much Should Be Invested in Different Ladders?

There is really no set amount. Each person will have their own financial goals and different levels of funds available to invest. One thing to keep in mind is how much you should invest into each certificate account. Think about what terms are ideal for you, what the rate will be, and what type of emergency plan you have in case something unexpected pops up.

It may be smart to put a smaller amount of funds into certificate accounts. Then, create a separate emergency savings account that can be used to cover unforeseen expenses. This method can lessen the risks of withdrawing the money out of the certificate account too soon and incurring a penalty.

Select term lengths for your CDs that best fit into your present financial situation and any future savings goals. Then, adjust your investments accordingly.


How Much Can You Earn?

If you invested $10,000 in a 2-year CD at 4.60% APY, you’d earn almost a $1,000! You don’t even have to do anything. It’s the easiest money you will make, and it’s guaranteed. Your principal amount is never at risk, unlike the stock market.


We’re Here to Help!

Laddering certificate accounts is a great strategy to build wealth, take advantage of future rate increases, and prevent all your money from being locked up long-term.

To learn more about Certificate Accounts or other investment options, call, chat, text, or stop in! We’re here to help M-F, 9am-4pm ET. (315) 671-4000.



Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents. Programs, rates, terms, and conditions can end or change at any time.