Stagger CDs for Biggest Benefit

The Associated Press "Your Money" column tackled an interesting question about how to get the best return on CDs over the long term today.

Question: I would like to get a long-term CD for my grandsons but have no idea how to start. Can you please help? - L.G., Perris, Calif.

Answer: To avoid locking up all of the money you have to invest at a low rate, consider "laddering" the CDs. This entails staggering the maturity dates of several CDs so you always have at least a portion of your funds near at hand.

So if you want to invest $5,000 for one grandchild, you might put $1,000 in a one-year CD, $1,000 in a two-year CD and so on, with your final $1,000 in a five-year CD.

When the one-year CD matures, you reinvest it in a five-year CD. By that time, the other CDs are each a year closer to maturity; the longest you have to wait at any time for a portion of your money to become available is one year.

This strategy lets you take advantage of the higher interest rates typically offered for longer-term CDs. At the same time, you're not locking up all your money at once.

One excellent way to ladder CDs instantly (ensuring great rates for each CD duration) is by using the CD Laddering function at MoneyAisle.com - the only one of its kind.