Compare a CD ladder strategy against a High Yield Savings Account (HYSA) to see which grows your money faster.
e.g. longer CDs earn slightly more
CD Ladder Final Value
HYSA Final Value
| Rung | Amount ($) | Term | Rate (APY) | Value at Maturity ($) |
|---|
| Year | CD Ladder Value ($) | HYSA Value ($) |
|---|
CD Ladder Strategy: You divide your total investment equally among several CDs (called "rungs"), each with a different maturity term (e.g., 1 year, 2 years, 3 years). Longer-term CDs typically offer higher APY. When the shortest CD matures, you reinvest it into a new long-term CD, maintaining the ladder. This gives you periodic liquidity while capturing higher long-term rates.
CD Ladder Formula (per rung): Each rung compounds annually: Future Value = P x (1 + r)^t, where P is the principal per rung, r is the APY for that rung, and t is the term in years. After maturity, proceeds are reinvested at the highest rung rate until the end of the investment period.
High Yield Savings Account (HYSA): The entire amount earns interest compounded daily (approximated as monthly here for clarity). Formula: FV = P x (1 + r/12)^(12 x t). The HYSA rate can change over time, but this calculator assumes a constant rate for comparison.
Which is better? CD ladders often outperform HYSAs when the yield curve is normal (longer terms yield more). HYSAs offer more flexibility since funds are not locked in. The calculator shows the tradeoff so you can decide based on your liquidity needs.
Key Assumptions: Rates are held constant over the investment period. CD proceeds are reinvested at the top rung rate upon maturity. No early withdrawal penalties are assumed. Results are pre-tax.