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Term Deposit Laddering 

Locking away your savings can be scary. What if something happens and you need access to the funds in your savings account? This fear usually causes people to put their money away for shorter periods of time at the expense of a greater interest rate. 

The solution to this may be Term Deposit Laddering. This investment strategy allows you to have access to your money at regular intervals, as well as benefit from the maximum interest rate of a five-year term. 

Term Deposit Laddering provides you with more flexibility than keeping all your investments in one or two large, shorter terms. It is ultimately less risky as it provides you access to your funds each year, if needed, and a greater chance for better returns as your investment isn’t renewing all at once at a potentially low rate. 

How does it work?

Divide your investments into equal amounts.

  • Separate the total amount you want to invest into five portions for the individual terms. 

Invest each portion into a one-to-five-year term.

  • These terms will have varying interest rates – the five-year term obviously offering the highest interest rate. Each year one term will mature and can be used to purchase a new term to continue the laddering strategy. 

Re-invest each term into the five-year term as they mature…

  • ONLY IF YOU WANT TO. This is where the access part comes into play – by investing your money in one to four-year terms you will gain access to your money once each term is up. This investment strategy ensures this access will happen annually.
  • A great way to think about it is like singing a harmony in rounds. Your five investments start “singing” all together, and each stop one-by-one once their term is over/has matured. 

Once your investment has matured at its designated term, you can choose to withdraw your deposit or roll it into the five-year plan. 

Term Deposit Laddering is one of the many personalized, no-nonsense solutions we provide to benefit our Members. Saving money is great but only if that money is working for you! We also want you to be able to take advantage of higher interest rates. Similarly, if life happens and you need access to your money, Term Deposit Laddering is designed to allow you to withdraw your funds annually without penalty. 

Contact an Advisor today to learn more about Term Deposit Laddering and navigating your financial life forward.

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