The interest rates offered on savings accounts and money market accounts today are hardly impressive.
The FDIC's weekly national rate and rate caps as of the end of December 2024 found the average national
rate for a non-Jumbo deposit was just 0.42%, with a cap of 5.33%.

Fortunately, consumers have other options if they want to save their money in safe, risk-free investment
vehicles. Term deposits, for instance, offer better interest rates. Credit unions might refer to them as
certificate accounts. There's a catch with term deposits, however. You must invest the money for a set period,
known as a term. If you withdraw that money before it matures at the end of the term, you'll face a penalty.

Term deposit terms do not have to be long. Banks and credit unions offer term deposits in a variety of terms.
So you can select a term deposit that will mature in three, six, or nine months if that meets your need.
Alternatively, you can opt for a longer term, as long as 60 months or five years in some cases. In most cases,
the longer the term deposit term, the higher the offered interest rate on that term deposit.

However, what if you want the higher interest rates associated with term deposits, but you also want easier access
to your cash? You can achieve this with an investment strategy known as laddering.

How Laddering Works

With laddering, you take out several term deposits, all with different terms. Ideally, you want your term deposits to
reach maturity at regular intervals. That gives you the choice at each maturation date to either withdraw funds,
renew them for a new term, or withdraw some and re-invest the rest.

Here's an example: You might invest some of your dollars in a term deposit with a longer term, maybe as long as 60
months. That term deposit comes with the highest interest rate possible. Next, you can invest more dollars in a term
deposit with a slightly shorter term, say 48 months. Also, open term deposits with terms of 36 months, 24 months,
and 12 months.

You can see that you've laddered your term deposits. A new term deposit will reach maturity every year. Moreover,
here's what you do when that happens:

• When your first term deposit matures after 12 months—the one that will pay the lower interest because of its
  short lifespan—you can take out what money you need for expenses, purchases, or other investments.
  Leave the rest of your dollars in it and then renew that amount into a 60-month term deposit.
• One year later, your second term deposit—the one with an original term of 24 months—matures. Again, you can decide
  to withdraw all your money, renew all of it, or keep some and save the rest. If you are laddering, you
  should only withdraw some of your money and then save the rest for 60 months.

As you can see, this scenario will play out every year. Each year, one of your term deposits will mature, allowing
you easy, and penalty-free, access to your cash. At the same time, the money you do not need will be generating
higher amounts of interest.

You can ladder at shorter intervals and with fewer term deposits, too. There's no reason you could not ladder
term deposits by investing in ones with terms of 6, 9, and 12 months, and then renew these as they mature.

Risks

If done right, laddering comes with few risks. However, you could break the chain if you are not patient. It
might be tempting three years into your laddering arrangement to empty one of your term deposits. You will not face a
financial penalty for doing so. However, you will leave a year-long gap in your cycle of maturing term deposits.

It is important to note that despite interest rates that are higher than those associated with savings accounts
or money market accounts, term deposits are still not one of the higher-yield investments out there. If you want to make
more money at a faster clip, you'll need to invest in more aggressive, but riskier, investment vehicles.

Still, for those who prefer a safe and steady investment, term deposit laddering might be a smart move. It is a clever way
to maximize both the accessibility and interest-generating powers of your term deposits.