Want a simple and relatively hands-off way to save more money? Make the most of your savings by laddering.
If you’ve never heard of laddering, or have never tried it, then you’re missing out on a huge savings opportunity. No, this isn’t some crazy new “millennial” trend or weird slang word for who-knows-what. Laddering is a simple concept to maximize your share certificate savings.
But let’s go through this one “rung” at a time. First of all- what is a share certificate? A share certificate is like a savings account where you deposit an amount of money ($500 minimum for Sandia Area, for example) and then can’t withdraw it again for X amount of time (Sandia Area offers 6-month to 48-month terms). In keeping your money in a share certificate for a longer period of time, Sandia Area will pay you a higher rate of return.
So how does laddering work? Simply divide an amount of money among certificates that mature at different intervals. As each share certificate matures, put it back into a longer-maturity certificate. This causes all of your certificates to earn a higher yield with a longer maturity, yet keeps a portion of your money reasonably accessible.
Still confused? Here’s an example:
If you have $2,500 to invest in share certificates, deposit $500 each into a 6-month, 12-month, 24-month, 36-month and 48-month certificate. When the 6-month certificate matures, roll all or a portion of the money (including dividends) into the 48-month certificate. When the 12-month certificate matures, roll it into the 48-month certificate. And so on. This way, all your money is getting the best rate and earning the maximum amount available at the time (in this case, the 48-month certificate rate), but a portion is always accessible when it matures each year.
For more information, and for Sandia Area Certificate rates, click here.
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