A Strong Alternative for Your Savings
You've accumulated a substantial amount in your Share Savings account and are thinking of shifting funds into a Share Certificate to earn higher interest. Now comes the dilemma: Do you put your money in longer term Share Certificates to get the highest rate? Or do you invest in shorter term certificates to keep your money more readily accessible—even if it means settling for a lower rate?
"Laddering" is a strategy that lets you have it both ways. Say you have $10,000 to invest in Share Certificates. Put $2,500 each into Share Certificates that mature in 6, 12, 18 and 24 months. Six months later, your first Share Certificate matures, yielding you $2,500 plus dividends earned. If you need the money, you cash in. If you don't, you reinvest in a new 24 Month Share Certificate at a higher dividend rate.
At 12 months, another Share Certificate matures. Again, if you don't need the money, you reinvest in a new 24 Month Share Certificate.
By the end of 24 months, all your money is earning at the 24 month rate. Yet a Share Certificate matures each 6 months, so you can tap into the cash if you need it. Laddering gives you both bigger savings and the advantage of maintaining access to your money.
Spreading the maturities from six to 24 months is just one strategy. If you prefer to tie up your money for longer time spans, you could invest in one, two, three and five year Share Certificates.
You can ladder any way you wish to best meet your financial needs. For more information or to start your LBS Financial Share Certificate ladder, contact us.
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