savings

5 ways to beat puny savings account rates

CD laddering brings better returns
Next
5 of 7
Back
CD laddering brings better returns

The deal: CD laddering spreads your money across a range of bank certificates of deposit with different terms and fixed interest rates.

The risk: Locking yourself into low rates.

Building a CD ladder in a struggling market can leave some of your money stuck in a long-term, low-rate certificate of deposit. Consider the average for a five-year CD today (1.71 percent) versus the same CD just two years ago (3.56 percent).

The reward: Diversification helps you take advantage of varied interest rates.

In a CD ladder, you invest some of your money at the highest rates available while keeping a portion of your funds in more readily accessible certificates of deposit for terms of three months to 12 months. This method keeps a portion of your funds invested in the market's highest interest rates at all times.

McBride offers simple advice to beginners for CD laddering in today's low-rate climate, instructing them to focus on CDs with shorter terms. When interest rates begin to climb again, McBride says savers should extend their ladders into longer terms to increase their annual percentage yield.

If you're uncertain about laddering, you can estimate your earnings with Bankrate's CD ladder calculator.


 

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Ask Dr. Don

How to cash aunt's savings bonds

Dear Senior Living Adviser, I have the power of attorney for my aunt who has dementia and lives in a memory care home. She has about $30,000 in Series EE savings bonds. She is rapidly going through her savings paying for... Read more

advertisement
Partner Center
advertisement

Connect with us