Investment Certificate laddering strategy
Typically you can receive higher crediting rates on a Investment Certificate if you commit to leaving your money with the bank for a longer period of time. This lack of liquidity causes many people to choose shorter-term Investment Certificates at the expense of receiving the higher interest rates. Investment Certificate laddering is a strategy that gives you the benefit of receiving the higher-interest crediting rates of longer term Investment Certificates but still provide you with some liquidity. For example, rather than deposit $60,000 for a one-year period and renewing each year at a lower one-year rate, you could create a three-year ladder and put $20,000 in a one-year Investment Certificate, $20,000 in a two-year Investment Certificate and $20,000 in a three-year Investment Certificate at the higher interest rates. After the first year, you take the one-year Investment Certificate and purchase a new three-year Investment Certificate. After the second year, you take the initial two-year Investment Certificate and purchase a new three-year Investment Certificate, and do the same with the initial three-year Investment Certificate. Starting in year four, you will have the three Investment Certificates receiving the benefit of a three year rate but also have access to 1/3 of your money each year without penalty should you need it. Use this calculator to determine the additional interest you could earn with a Investment Certificate laddering strategy.
