Share Certificate Laddering: How to Make Your Money Work Harder

2022-09-12T07:30:42-05:00Personal Finance|

You’ve probably heard a financial expert say, “Make your money work for you!” This means doing much more than simply depositing your money into one Share Certificate — also known as a Certificate of Deposit or CD. The strategy used by the most financially savvy Certificate investors is laddering.

What is Share Certificate Laddering?

Laddering is a strategy to make the most of a Share Certificate without facing the penalties of early withdrawal. It might seem complicated at first, but it is a viable option to make your money work while still allowing you to have access to it in shorter periods of time. By laddering, you can get the best return on your money but still use it as you need it.

How Does Share Certificate Laddering Work?

Laddering works like this: instead of putting all your money into one Certificate, split it up. First, decide the total amount of money you want to invest. For the purpose of this example, let’s say $25,000.

Because you want your money to grow at the best yield available, you might initially want to put all your money into the 60-month Certificate. Instead, you should set up a Certificate ladder and split your money into multiple tiers. With $25,000, you would meet the minimum amount to open five Connexus Certificates (one at every term limit). You put $5,000 in a 12-month term Certificate, $5,000 in the 24-month term Certificate, and so on until you’ve allocated the full $25,000.

What are the Benefits of Share Certificate Laddering?

Because you now have five Certificates open, your money is available to you in increments, allowing you access to it without incurring early withdrawal penalties. When the first Certificate matures in 12 months, you can choose to withdraw the funds or open a new Certificate with the money. If you don’t need the money right then, the best move is to reinvest it into the longest term and highest interest rate Certificate, so you can gain even more dividends.

After another 12 months, your second original Certificate matures, and again you can make the decision of whether you want to withdraw the money or reinvest it. Again, if you don’t need the money then, you can open the longest term and highest interest rate Certificate since you will already have another Certificate maturing in just 12 months (the third original Certificate). You can keep laddering in this way until you have all of your money gaining dividends at the highest rate while still being accessible. By laddering, your money will work hard while still being accessible.

Making your money work for you is smart, and one of the smartest ways to do that is to open up Share Certificates.

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