Last fall I started a 5 year CD Ladder at my bank, USAA. At the time I thought it might be a good time to start a CD ladder because the fed had recently cut the interest rates. The interest rates that banks were offering quickly followed suit. Fortunately, I still had time to lock in good rates for my CD Ladder. This turned out to be a good move, because the fed cut interest rates multiple times since then, all the way down to our current level of 1%.
The first year of my CD ladder matured this week, and since I don’t need immediate access to the money, I decided to roll it back into another 5 year CD. My bank is offering a 5.00% APY for 5 year CDs, which is much higher than the interest rates I can get on the money at any bank. I currently have a couple high interest savings accounts which offer some of the highest interest rates around.
CDs aren’t the best investment for people looking to make a lot of money – even at the best of times they probably only just keep pace with inflation. But keeping some of your investments in cash can help smooth your returns and mitigate against large losses like we have recently seen in the world markets. And the best part of having a 5 year CD ladder is that I can save money at better rates than I can in a savings account and I am never more than 12 months away from access to some of my money.
Last fall when I started this CD Ladder, the rates had recently been cut. At the time, it was common to find online banks offering 5% interest rates. Since then, the fed has cut rates multiple times, to our current level of 1%. Keeping the money in the CDs ensured I would get a higher rate of return than leaving the money in my high interest savings account. CDs may not be for everyone, but it can’t hurt to leave a little money in one.