Maintaining liquidity while taking
advantage of higher rates.Maintaining liquidity while taking
advantage of higher rates.
When it comes to savings, having access to your money is just as important as earning high interest rates. Unfortunately, striking a balance between the two can often be a challenge.
With CDs, investors can enjoy traditionally higher rates, but they have to sacrifice liquidity, locking their funds away for a set term with the highest rates usually requiring the longest commitment. The alternative, high-yield savings accounts, provides investors with the access they want, but doesn’t offer the same high returns.
For this reason CDs have usually been reserved for long-term goals and planned expenses. However, for investors who enjoy the low-risk and high return of CDs yet want the liquidity provided by CIT Bank High Yield Savings, there may be another option.
CD laddering is a simple savings strategy that utilizes multiple CDs to provide investors with the best of both worlds: liquidity and higher rates.
Who should ladder CDs?
By spreading your money among several CDs with staggered terms, part of your money is always near maturity while the other
part is taking advantage of the higher rates offered by longer-term products. This provides investors with rolling access
to their funds should they need it. And because you are continuing to reinvest in your ladder upon maturity, you're also
able to take advantage of any rate changes in the marketplace.
The first step in laddering CDs is figuring out how much you have to invest. Once you know this, simply choose several CDs
with rolling maturities that give you access when you need it. For example if you wanted access every 12 months, you could
utilize 1-, 2-, and 3-year CDs. As each CD matures, take out what you need and reinvest the rest, or reinvest the whole
amount into a new CD equal to the longest term on your ladder—in this case, a 3-year CD. By continuing to do this year
after year, you should enjoy a higher return than if you just opened a single short-term CD.
For more information on CD laddering, and for a step-by-step guide to setting up your CD ladder, review our CD laddering infographic.
This information is made available to you as a self-help tool for your independent use and is not
intended to provide investment advice. We cannot and do not guarantee its accuracy and applicability to your individual
circumstances. All examples are hypothetical and are for illustrative purposes. Please consult with a financial advisor
for a solution suitable for your needs.