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Getting the Most from Your Deposit Returns

In today's volatile markets, a wise investor looks for ways to balance out earnings without tying up all their investment funds for long periods of time. Many investors are uneasy with the stock market's unpredictable performance. As a rule, shareholders want to keep a portion of their portfolio liquid.

To maximize the return on your money, you might like to try an option called laddering. To understand this strategy you will need a basic understanding of share certificates.

What is a share certificate? A share certificate is a credit union account that earns dividends on the principal placed with the credit union. The share certificate is purchased for a fixed term. These terms may range from 30 days to 6 years in which you, the shareholder, agree to give the credit union your money for the agreed period of time. Dividends are compounded and credited monthly. Keep in mind; there are penalties for early withdrawal and fees may reduce earnings. In addition, share certificates are federally insured to at least $250,000 by the National Credit Union Administration and backed by the full faith and credit of the United States Government.

How does a laddering strategy work? A share certificate ladder is made up by purchasing several share certificates at one time, or over a period of time, with different maturity dates. One example of laddering your share certificates is to have share certificates with maturity dates of one year, two years, three years, four years, and five-years. These five investments make up the rungs of your ladder, with one certificate maturing every year for the next five years.

The following is an example of "laddering" share certificates:

Let’s assume you have $50,000 to invest. You choose to open the five share certificates for $10,000 each as follows:

  • Share Certificate 1 $10,000: 1-Year Term
  • Share Certificate 2 $10,000: 2-Year Term
  • Share Certificate 3 $10,000: 3-Year Term
  • Share Certificate 4 $10,000: 4-Year Term
  • Share Certificate 5 $10,000: 5-Year Term


At the point of share certificate number one's maturity date, it would be renewed for five more years. Share certificates two and three would also be renewed for five more years at the end of their term. Share certificate number five is already a five-year certificate. By laddering your share certificates in this manner you will have the best possible rates of return with a share certificate maturing every year. This strategy allows you to take advantage of higher rates normally associated with longer-term share certificates while maintaining more frequent access to a portion of your funds. If you do not need the certificate funds, re-invest the money into a new share certificate for the longest term possible. Taking action to re-invest your savings will in turn keep your ladder growing.

Another advantage of laddering your share certificates is that over time the rate of return typically evens out the high peaks and low valleys that interest rate cycles historically take. Currently financial institutions are paying some of the highest certificate share rates we have seen in the last decade.