Deposit Information

Reaching Your Short Term Savings Goal With A CD Ladder

Perhaps your goal today (October 2008) is to maximize your earnings on a sum of money that you won't need for three years to fund a wedding, a college education or use as a down payment on a new house (October 2011). You could choose a 36-month CD and hope that interest rates don't rise or that you don't need access to your money, as your savings will be locked in for three years. Or, you could choose to buy and renew a 12-month CD during each of the next three years, but you would be sacrificing the higher returns usually offered with longer term CDs.

The CD Ladder offers many options to help you reach your goal. It makes saving easy and offers access to your money if you should need it prior to your goal date or to take advantage of rising interest rates. For example, Dollar Bank can open three CDs for you with terms of 12, 24 and 36 months. Each of these CDs will earn interest at its current rate, creating a blended rate that is higher than the shortest CD in your ladder. So, you start earning more on your entire balance from the very first day your CD Ladder is open.

Following is a timeline of the 3/12 CD Ladder with a Goal renewal option.

  4.00% APY   4.50% APY   5.00% APY Bracket Blended rate*
 12 months  24 months  36 months
 Arrow  Arrow  Arrow  
4.50% APY   Bracket Blended rate*
  24 months   Glass with
12 months
  Glass with
24 months
  Arrow   Arrow   Arrow  
  4.00% APY   Bracket Blended rate*
  glass with
12 months
  12 months   glass with
12 months
  Arrow   Arrow   Arrow  
All three CD's reach maturity.

One year after your purchase date (October 2009), your 12-month CD is maturing. We will reinvest this CD into a 24-month CD. You will benefit from an APY that is likely to be higher than the current 12-month rate at that time and this CD will mature on your goal date (October 2011). Your remaining CDs have 12 months and 24 months remaining until maturity.

After the second year (October 2010), your original 24-month CD is maturing. We will reinvest this CD into a 12-month CD. At this point, each of your three CDs has 12 months until maturity and will mature on your goal date (October 2011) so you have the money you need when you need it!

*Blended Rate: This is the weighted average interest rate of each of the individual certificates in your CD Ladder for the next liquidity period. Over time, as interest earnings are credited to your individual CDs or you increase or decrease the amount of an individual CD that is renewing, the blended rate you are earning will be updated to reflect these changes. The rates and terms shown are for purposes of example only and do not reflect actual rates and terms offered by Dollar Bank. The example assumes rates remain constant, however actual rates may vary substantially over time.
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