Skip to main content
STCU Log in >
Illustration of woman interviewing for a job.
Illustration of woman interviewing for a job.
Illustration of woman interviewing for a job.

Certificate laddering: What are the pros and cons?

Published May 2024. 

It’s a savings strategy that could help you reach your goals.

Certificate laddering is certainly something that can level up your personal finance game.

First things first: what is a certificate? They’re a type of safe and insured account that allows members to earn dividends on an initial deposit by agreeing to leave it untouched for a set amount of time, AKA the maturity date. We have another blog where you can read more about them.

Now that that’s out of the way, let’s talk about certificate laddering.

What is certificate laddering?

It’s a way to both maximize returns on your certificate savings and keep some flexibility with the timing of their maturity.

Instead of parking all your money in one certificate for a set amount of time, you divide it into smaller chunks and spread out the maturity dates of your certificates. This way, you can still enjoy those sweet, sweet dividend rates typically earned with longer-term investments, while also keeping the flexibility to access funds from shorter and medium-term certificates as they mature over time.

For example, if you have $5,000 you could put it all in one certificate that matures in five years. That money is locked away that entire time.

Or you can open five separate certificates with $1,000 each, that mature in one, two, three, four, and five years. That way, each year one of your certificates matures, you have access to that money, and can decide what you do with it next. Whether that’s to use it on something you’ve been saving for or putting it into another certificate to add to the top of your ladder and level up your money, the choice is yours.

In the everchanging landscape of finance, there may come occasions when short-term certificate rates are higher than long-term ones. That's where having a solid connection with your financial institution comes in handy. By staying in the loop about their latest certificate offerings, you can make decisions that fit your financial goals.

That’s the gist of what certificate laddering is. Here are some of the pros and cons:


Helps maximize returns: It allows you to take advantage of higher dividend rates usually offered by longer-term certificates while maintaining access to other funds locked in at shorter terms.

Diversification: By spreading your investments across multiple certificates with staggered maturity dates, you reduce your exposure to interest rate fluctuations. That helps minimize some risk.

Flexibility: It provides regularly scheduled access to your funds as each certificate matures. This allows you to adjust your strategy based on changing financial goals or market conditions.


Complexity: Juggling multiple certificates with various maturity dates can be a little tricky. You need to keep a close eye on timing and have a plan for the money coming from a matured certificate.

Potential opportunity cost: While laddering provides stability and security, it might not rake in the highest returns compared to other investment strategies. It’s important to note that those alternative strategies may not give you guaranteed returns and could even lose principle.

Limited liquidity: Sure, you can access your funds as each certificate matures, but watch out for early withdrawal penalties if you need to tap into your money before its maturity date. These penalties could eat into your overall returns, so tread carefully and only withdraw money from your certificate ladder during maturity periods to optimize the return.

To wrap things up, certificate laddering is a smart and strategic way to grow your savings while minimizing risk. However, it's important to weigh the pros and cons carefully and consider whether it aligns with your financial goals. After all, your financial journey is all about finding what works best for you.


This information is for educational purposes only. Consult your tax/financial advisor. Fees may reduce earnings. Penalty for early withdrawal. Rates subject to change. View all rates, terms, and disclosures.