The problem laddering solves

Locking all your savings into one long-term FDR earns a good rate but leaves you without access to any of it until maturity. Keeping everything in short-term deposits gives flexibility but usually earns a lower rate.

How laddering works

Instead of one deposit, split your total savings into several FDRs with different maturity dates — for example, into four deposits maturing at 3, 6, 9, and 12 months. As each matures, you can either use the funds or reinvest into a new deposit at the current rate.

The benefits

• Regular access to a portion of your money as each deposit matures.
• The ability to take advantage of new (potentially higher) rates as you reinvest.
• Reduced risk of needing to break a deposit early and pay a penalty.

Building a simple ladder

Decide your total savings amount and how many "rungs" (deposits) you want, then divide roughly evenly across increasing terms. Once the first deposit matures, reinvest it at a term equal to your longest existing rung, keeping the ladder going indefinitely.

Who this suits

Laddering is useful for anyone who wants better-than-savings-account rates but doesn't want to lock away their entire balance for a long, single term.