As interest rates rise in the U.S., now may be a good time to review how you are allocating your monthly income to savings, expenses and long-term financial plans. Consider options that can help you navigate different market environments, including recessions. A time deposit account (also known as a TD or CD) could be an account to consider in a volatile stock market.

It’s recommended that individuals and families build and maintain a savings fund that can carry them through at least six months of living expenses. But what if your emergency fund is already well-stocked? What are the next steps and strategies for optimizing your savings plan? One strategy you might consider is time deposit laddering.

What is a time deposit account?

A TD is a savings vehicle that typically allows you to earn interest on your money faster, or at a greater rate, than a standard savings account. With TDs, interest is compounded over set terms, which means your funds may be more likely to grow over time.

However, these interest rate advantages come with a stipulation: TDs lock your money in for a specific time period (term), which can range from one month to five years (and beyond). A TD’s term is dependent on both the institution offering the account, and the interest rate you prefer, with longer terms typically offering the most attractive interest rates.

How to ‘ladder’ your TDs

Accessing the funds you place in a TD before the account matures can be difficult, and may involve penalties and fees or charges. But, if you time your accounts just right, you can set a savings strategy that provides regular access to your TD funds, while still giving you the benefits. A time deposit laddering plan involves deliberate fund placement in multiple TDs over time with staggered maturity dates.

Start by shopping for TD accounts and asking for details on terms and interest rates. Next, determine how much you plan to invest in your TD laddering strategy‡, which can be split between multiple TD accounts. Finally, begin opening TDs with different maturity timelines.

For instance, if you have $5,000 to invest, you may choose to place $1,000 in a one-year TD, $2,000 in a two-year TD, and $2,000 in a three-year TD (and so on). Once the first account matures, you have two options: take the money out or reset your TD with a new term and rate. The beauty of the laddering strategy is that you can access that maturing portion of your cash after that first year if you need it. But, if you don’t need it, you can open a new TD with a longer term, which may have the more attractive, long-term rate. Over time, your TDs will mature, providing cash access while also offering opportunities for interest rate growth.

What this means in a rising rate environment

The federal funds rate is often used as the benchmark for TD or CD interest rates. Therefore, when the federal rates fall or rise, so does the interest rates on new TDs. When rates are high, it can make putting money towards a TD more lucrative. Yet, even in a low rate environment, TDs are still great options for a diverse financial plan, which can help secure funds in a falling market.

TDs do have lower returns over time than stocks; however, they can help balance market volatility in your financial plan. Over time, TDs could help strengthen a portfolio’s returns by acting as a stable element in a changing market.

Benefits of time deposit laddering


TD accounts are insured by the FDIC‡ up to the standard deposit insurance coverage limit, so you may have additional protections on the accounts you open.


TDs are unaffected by stock markets shifts and changes, which can help balance market volatility in your financial plan.

Better rates:

In this interest rate environment, it can be difficult to predict how interest rates will look three months from now, let alone three years. However, a TD laddering strategy can help you take advantage of rate changes when each of your funds hits maturity on your staggered pace. Then, you can review your rate options and determine the best way to renew your TD or use your money.


You can decide exactly how your funds are split, used and scheduled. Choose the number of TDs, amount in each, and terms, to satisfy your need to access funds upon maturity, while increasing your earnings potential.

Planning for the long haul

While it may take a few years for this strategy to be fully implemented, remember that each TD is just one part of the plan. Customize your time deposit ladder with different TD terms to make sure you feel comfortable with your funds access and the rates you are earning.

From a big picture perspective, a TD laddering savings strategy is a good way to take advantage of long-term TD rates, while still having the flexibility to access your cash in the short term.

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