Short answer
Keep 3 to 6 months of essentials in a HYSA and spread the rest across CDs of one to five years, so one matures each year. $50,000 split $15,000 HYSA and $35,000 ladder earns about $2,040 in year one at the example rates.
1. The plan
- 1Put 3 to 6 months of essential spending in a HYSA for instant access.
- 2Split the rest into five equal CDs with terms of one to five years.
- 3When a CD matures, reinvest it in a new five-year CD so the ladder keeps rolling.
2. Worked example
$50,000 saved, with essential spending of $3,000 a month. Example rates only:
| Bucket | Amount | APY | Year-one interest |
|---|---|---|---|
| HYSA (5 months of spending) | $15,000 | 3.80% | $570.00 |
| 1-year CD | $7,000 | 4.00% | $280.00 |
| 2-year CD | $7,000 | 4.10% | $287.00 |
| 3-year CD | $7,000 | 4.20% | $294.00 |
| 4-year CD | $7,000 | 4.30% | $301.00 |
| 5-year CD | $7,000 | 4.40% | $308.00 |
| Total | $50,000 | 4.08% blended | $2,040.00 |
3. After the first year
The 1-year CD matures with $7,000 × 1.04 = $7,280. Roll it into a new 5-year CD, and every rung will soon be a 5-year CD maturing a year apart.
4. Why it works
- Part of your money is available every year without a penalty.
- The HYSA covers emergencies, so you do not have to break a CD.
- Longer CDs often pay more, and the ladder spreads out reinvestment risk.
5. Check your answer
- CD APYs are annual, so each CD earns its APY in year one.
- Your real rates will differ from the example.
- Do not put more in one bank than the $250,000 insurance limit.
6. Frequently asked questions
What is a CD ladder?expand_more
A set of CDs with different maturity dates, such as one to five years, so one matures each year.
How much should I keep in a HYSA?expand_more
Many people keep 3 to 6 months of essential spending in a HYSA before putting money in CDs.
Why not put everything in the highest-rate CD?expand_more
You lose access to the money and pay a penalty if you need it early, and a single maturity date exposes you to the rate on that day.
Can the CD ladder planner help?expand_more
Yes. The CD Calculator has a five-rung ladder planner for your own rates.