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How CD ladders work for community associations

  • Tag for article:Community Association Banking Articles

A CD ladder is an investment strategy that gives you the strength of long-term CDs while freeing up portions of your money at short-term intervals. It’s an ideal cash management concept for community associations because it provides safe earning power and regular access to funds.

A CD ladder comes with four key benefits:

  1. Fixed rate of return. You know what you’ll earn, so it’s easier to plan.
  2. Liquidity. With short CD maturity periods, your funds are ready when you need them.
  3. Competitive interest rates. Because your rates are tied to the market, they’re always among the best available.
  4. Safety. Depending on the product you choose and the amount you invest, you also get peace of mind knowing your investment is FDIC insured.

How CD ladders work

A CD ladder is a way of setting up multiple CDs so they mature at staggered intervals. Let’s look at an example:

  • The XYZ Homeowners Association has $200,000 in reserves and wants to invest in laddered CDs.
  • The bank breaks the investment into smaller increments, placing them in a series of CDs with staggered maturity dates: $50,000 each in CDs with 3-month, 6-month, 9-month and 12-month maturities.
  • Using this strategy, XYZ HOA will have $50,000 available every three months. If the money isn’t needed for a reserve project then, it can simply be reinvested. 

What about FDIC limits?

For reserves over the $250,000 FDIC limits, there are investment choices for associations that include protection for deposits over the limit. The strategy is the same as in a regular CD ladder, but your investment is protected.

How can I get started?

The first step is to sit down with a bank specializing in community associations to discuss your specific needs. Be prepared to discuss your future projects and when they will begin.

The bank will help you ladder your CDs to align with your major projects, so they’ll mature when funds are needed.

As an industry leader, we understand the unique needs of community associations. We listen to our clients and utilize our expertise to help you protect and grow your funds so you can focus on your community.


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