What it is
Time deposit laddering is a strategy that involves opening multiple time deposits with different maturity dates. This offers a way to grow your money through time deposits while giving you regular access to some of it.
Let’s say you have P300,000 and you want to put it in a time deposit but don’t want to lock all your money away for too long.
To build your ladder, you’ll open 3 time deposits with P100,000 each. The first one matures in 1 month, the second matures in 2 months, and the third matures in 3 months.
When the first time deposit matures, you can either reinvest the money in a 3-month time deposit or use it for another purpose. You’ll repeat the process for the next 2 time deposits.
If you choose to keep the ladder going, you’ll create a cycle where one of your time deposits will mature every month.
What it means for you
Spreading out your money in different time deposits can give you flexibility and control. You can choose the terms and amounts according to your plans.
Through laddering, you can enjoy the benefits of time deposits while having the option to get a portion of your money at regular periods.
This is helpful in case you find another time deposit with higher interest, a different investment with better potential returns, or if you simply need money to spend.
Of course, pre-termination is always an option if you need to end a time deposit early. However, this typically comes with a certain penalty.
That’s why laddering is worth considering if you feel the need to have access to your money from time to time.
