What a CD ladder is and why it helps — A CD ladder is a sequence of certificates of deposit with staggered maturities so you have periodic access to portions of your principal while capturing higher yields from longer-term CDs. For example, instead of putting $12,000 into a single 12-month CD, you might buy four $3,000 CDs maturing in 3, 6, 9, and 12 months. As each CD matures you can withdraw, spend, or reinvest at current rates. Laddering reduces interest-rate risk (you’re not locked into one rate for all funds) and improves liquidity compared to a single long-term CD while typically delivering better average returns than holding only short-term CDs. This approach is especially useful when rates are rising or uncertain because you regularly get the chance to reinvest at prevailing rates.

How to build and manage a ladder — Choose ladder rungs that match your expected liquidity needs (3–12 months are common for short-term ladders). Decide on a total amount and split evenly among rungs. When a rung matures, evaluate current yields and your cash needs: you can roll it into a new long-term CD to capture a higher rate or keep it liquid if you need access. Be mindful of early-withdrawal penalties and minimum denomination rules. Ladders can be tailored (irregular amounts, overlapping maturities) and automated if your bank supports multiple CD purchases; keep an eye on rates to determine when rolling makes sense.