When the interest rates are rising
Investing in a CD ladder can be particularly powerful in a rising rate environment. Every year, as one of the CDs in your ladder matures, you reinvest the proceeds in a new, long-term CD. If rates are rising you earn more money in interest as you reinvest.
One of the biggest benefits of investing in a CD ladder is that you know exactly how much you money you will have at different points in time. This makes it easier for you to plan for your future.
For example, if you want to go on a vacation, buy a car, or get married, you can invest your savings in a CD ladder and set it up in such a way that you will have the money exactly when you need it.
Key aspects to remember about building a CD ladder: A CD ladder is a low-risk investment which offers modest returns at regular intervals. If you need money to buy a big-ticket item or make a down payment on a house, it might be better to look for other investment options that can help you earn more.
Do not invest your emergency funds in a CD ladder. The best place to park your emergency funds is a savings account or a checking account. There you can access the money any time you want.