What’s a "certificate" and why is it called a “ladder”? Let me break it down…
First, let
me start off with the question - what is a CD? And no, I am not referring to those circular disks
from the 90s we used to listen to music in a stereo. This type of CD is defined
as a certificate of deposit. At credit unions, we call them “Share Certificates”.
A CD is a product where you place your money in an account for a period of time
(as little as 3 months or as long as maybe 5 years) while you earn a higher
interest rate; typically more than your savings or checking accounts. U.S. Eagle offers a product that most banks
or credit unions don’t…ahem, drum roll please…the LADDER CERTIFICATE!
So, what is this
infamous ladder certificate you ask? It is five CDs (share certificates) in
one. The ladder consists of a one year, two year, three year, four year, and
five year share certificates. Each one
of these certificates will earn the 5-year interest rate. When the 1-year CD
matures, (meaning coming up for renewal) it will automatically turn into the 5-year
CD, while the 2-year CD is now the 1-year (because you only have a year left
for maturity), and the 3-year becomes the 2-year, and so on.
The unique
thing about this ladder certificate is you can contribute to the CD whenever
you have $1,000.00 or more to equally disperse amongst the CDs, (in this case,
$1,000.00 will be split into all 5 of the CDs) all the while you still earn
the interest rate of the 5-year CD.
This sets
the Ladder Certificate apart from other CDs because it allows you to make
continuous equal deposits into each of the 5 CDs whenever you want as long as
you do not break your ladder. If you do close out any of the CDs when they
mature, you can no longer contribute to the remaining CDs.So, save up some money and invest it. You'll make money on your money. Plus, you'll sound cool when you explain this investment to all your pals, "Yeah...just invested my money in a ladder certificate...oh you don't know what that is?"
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