Here’s a way to get around the worst part of CDs (certificates of deposit) which give you a higher guaranteed interest rate but lock your money in for a certain period of time: Make a ladder!

To wit, instead of buying one CD with your spare cash, buy several CDs with successive maturity dates. So if you have $5,000, you could put $1,000 into a 1-month, 3-month, a 6-month, a 9-month, and a 12-month. This way you take advantage of the higher interest given to the longer-term CDs, but with the money coming up at known times you offset the liquidity problem. Then as each one comes up, you can either use it or reinvest it in a longer-term CD, putting one ladder rung in front of the other.

With the CD-laddering method, you can earn a little more interest while still having access to your cash. Not something that’s so easy to do these days.

Have you tried a CD-ladder? How did it work out for you? Let us know in the comments.

MORE: How to ladder a CD portfolio [Bankrate] (Photo: Mzelle Biscotte)

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