When it comes to savings accounts, Civic Choice Certificates or Share Term Certificates (also known as Certificates of Deposit or CDs, at banks) tend to have higher interest rates than traditional deposit accounts. However, you don’t have access to your funds during the certificate’s term. Certificate laddering is an investment strategy that works around this to provide both short- and long-term benefits. 

By spreading your total investment among multiple certificates with staggered maturity dates, you can combine the higher rates of longer-term certificates with the more frequent access to your money of shorter-term certificates.

The benefits of a certificate ladder

A certificate ladder can be a smart financial strategy toward reaching your savings goals: 

• Access to cash 
  With multiple certificates and staggered maturity dates, you have quicker access to your money than if all your money was placed in a single certificate.
• Greater earnings 
  If your long-term certificates are earning a higher rate, the short-term certificates give you a chance to take advantage of the market, should rates go up.
• Flexibility 
  With staggered maturity dates, you have more frequent access to your money, whether you need it for purchases or want to pursue other investment opportunities.

How to build your certificate ladder

It’s easy to build a certificate ladder. It can be set up through Civic Credit Union using their Choice Certificates or with CDs from a bank. To create a ladder, purchase several certificates with staggered maturity dates. You can set up the ladder so you have certificates maturing on a monthly or annual basis. As each certificate in your ladder matures, you can either reinvest the money into a new certificate or withdraw the funds. 

Here’s an example of an annually-maturing certificate ladder: Let’s say you purchase five $1,000 certificates. The first certificate will mature in 12 months, the second in 24, the third in 36, the fourth in 48 and the final certificate will mature in 60 months. After a year has passed, your 12-month certificate has matured. If you don’t need the funds, you can put the money back into the ladder by purchasing a new 60-month certificate. From then on, you add a new “rung” to the ladder with the purchase of a new 60-month certificate every year as the next one matures. 

Your dividends are automatically paid monthly, by transfer from the certificate to another deposit account. If the term is six or 12 months, you can request that your dividends be paid when the certificate matures.

Certificate ladders let you lock in some higher rates associated with long-term certificates, while the short-term certificates give you a chance to take advantage of the market, should rates rise. What’s more, since you don’t tie up all your money, you’re never more than a year away from at least some of it. The early withdrawal penalty for all certificates is 90 days’ dividends or the actual dividends earned, whichever is less. 

The minimum deposit to open a certificate is $250 at Civic Credit Union and the dividend rate is fixed during the term. See Choice Certificate rates or log in to online banking to set up your certificate ladder.