This Is How Much Money You Can Make With $3,000 in a CD Ladder

Certificates of deposit (CDs) are one of the safest places to put your money. There's no risk of losing money since top banks all have FDIC insurance. There's also no risk of your CD's rate dropping like there is with savings accounts.

The drawback is that you need to lock up your money for the entire CD term. Otherwise, you'll be charged an early withdrawal penalty. But there's a simple solution: building a CD ladder.

CD laddering is a strategy where you open multiple CDs with different maturity dates. You get the benefits of CDs without committing all your savings for the same amount of time. Here's a look at how much you could make doing this with $3,000.

Here's how much you can make with $3,000 in a CD ladder

CD earnings depend on three factors: the term, the annual percentage yield (APY), and the deposit amount. If you put $1,000 in a 1-year CD with a 5% APY, then you'd earn $50 in interest.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 10, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 10, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

The example below assumes you open five CDs with terms ranging from three months to five years. You divide your $3,000 equally among each of them ($600 apiece). For the APYs, I used the highest CD rates I could find right now. Here's how much interest you'd earn at each CD's maturity date.

During the first year, you'd collect $55.35 in interest from your first three CDs. You'd have earned another $57 by the end of year two, bringing your total to $112.35. After three years, you'll have earned a grand total of $186.69 in interest.

When to use a CD ladder

A CD ladder works well for any savings that you want to grow and that you won't need to access at a moment's notice. This rules out your emergency fund. You should definitely keep that in a high-yield savings account because you could need to withdraw from it at any time.

CD ladders are popular with people who want to build a steady stream of passive income. They're also a good choice for maximizing interest. Interest rates are high right now, but they may drop later this year. With CDs, you can lock in rates while they're near their peak.

One other situation when you normally shouldn't use a CD ladder is for your retirement savings. While CDs are safe, stocks are much better for long-term growth -- the stock market has historically averaged a return of about 10% per year.

You may want to use CDs if you're retired or closing in on retirement and you'd like to shift some of your retirement savings to more conservative investments. But if retirement is still decades away, it's better to invest in stocks to maximize growth.

How to build a CD ladder

When you're ready to make your own CD ladder, here's how to do it:

• Decide how much money you want to deposit.
• Choose the term length you want for your CDs. Popular options include laddering CDs that mature every three or six months.
• Look for CDs with competitive rates for the terms you want. You don't need to open all your CDs at the same bank -- it makes more sense to prioritize getting the highest rates.
• Open your CDs and distribute your savings between them.

Building a CD ladder doesn't take long. And as your CDs mature, you can decide if you want to roll them over into new CDs or use the money for something else.