The best way to maintain the liquidity of your savings, boost yield and protect yourself against rapid rate changes is to stagger the maturity dates of your CDs.
Sometimes called "laddering," staggering maturities is really a form of diversification. You spread your money over several different maturities: say, one-fourth of your CD funds in certificates maturing in three months, one-fourth in CDs maturing in six months, one-fourth in CDs maturing in a year and one-fourth in CDs maturing in two or three years. (A profitable rule of thumb based on the history of interest-rate movements: If five-year CD rates ever reach 10% again, stock up on them.)
Normally, longer maturities pay more interest, so why not just concentrate on those?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In fact, that would be a splendid strategy if you could accurately predict the direction of interest rates and your prediction was that they were going to fall. But what if they rise?
By staggering your maturities, you have protected yourself in either case. If rates rise, your short-term CDs will mature in time for you to reinvest the principal at the new, higher rates. If rates fall or stay flat, you'll be sitting pretty because you've locked in the current two- or three-year rate. By the time those certificates mature, rates could well have turned in the other direction again.
If you're willing to sacrifice some of your yield for a little less work, consider either money-market mutual funds or money-market deposit accounts. But before we look at these accounts, let's take a closer look at the money market itself.
-
5 Easy Weatherproofing Projects That Help Prevent Damage and Save on InsuranceProtect your home from storms and water damage with these simple weatherproofing upgrades — some may help reduce your home insurance premium.
-
If Trump Fires Jerome Powell, What Happens To Savings and Mortgage Rates?President Donald Trump expressed his desire to remove Fed Chair Jerome Powell. If the president is successful, how would it impact your savings accounts?
-
What DOGE is Doing NowThe Kiplinger Letter As Musk's DOGE pursues its ambitious agenda, uncertainty and legal challenges are mounting — causing frustration for Trump.
-
A Move Away From Free TradeThe Letter President Trump says long-term gain will be worth short-term pain, but the pain could be significant this year.
-
Trump’s Whirlwind Month of Crypto MovesThe Kiplinger Letter The Trump administration wants to strengthen U.S. leadership in the cryptocurrency industry by providing regulatory clarity.
-
What To Know if You’re in the Market for a New Car This YearThe Kiplinger Letter Buying a new car will get a little easier, but don’t expect many deals.
-
What Could Derail the Economy This Year?The Letter While the outlook for the U.S. economy is mostly favorable, there are plenty of risks that bear watching.
-
Three Ways President Trump Could Impact the EconomyThe Letter Some of Trump's top priorities could boost economic growth, but others risk fueling inflation.
-
Europe Faces Economic and Political Headwinds Next YearThe Letter Challenges for Europe: Potential tariffs, high energy prices and more competition from China will weigh on the bloc in 2025.
-
Don't Sleep on Japan's Economic TransformationThe Letter After almost three lost decades, Japan — one of the world's biggest economies — is finally showing signs of life.
