Affordable CD Investing Strategies for Every Budget

If you've never invested in a certificate of deposit (CD) before, that's okay. Everyone starts somewhere. And if you're convinced you don't have enough money to invest, you may be surprised. Whether you're a newbie or a seasoned investor, here are a few strategies sure to fit most budgets.

Just starting out

As a quick reminder, a CD is an investment in which you deposit money into an account and agree to leave it there for a specific amount of time -- typically between three months and 10 years. In return for leaving your money in the account, a bank promises to pay you a guaranteed interest rate.

If you're interested in investing in a CD but worry that you may not have enough money to get started, it's important to know that a large deposit is not always necessary. For example, you can open a Barclays Online CD with no money down. What's more, a 1-year Barclays CD currently pays a 4.00% APY. But Barclays is not alone. Here are several other CD offers requiring no minimum deposit:

• Synchrony Online CD: 6-month, 3.70% APY
• Ally High Yield CD: 5-year, 3.50% APY
• Capital One 360 CD: 5-year, 3.50% APY

Once you have enough money tucked away to carry you through an emergency, a CD could be a good way to make any additional funds work for you.

Your feet are already wet

If you've had a CD or two before, you know how it works. As long as your money remains in the CD for the entire term, you receive your initial investment plus interest back. If you withdraw the money before the end of the term, it's possible to be hit with a penalty (depending upon how far into the term you make the withdrawal).

One way to avoid the need to withdraw money before the CD matures is to "ladder" your CD investments. Here's how it works:

• You take out several CDs, each with a different term. For example, you might invest in a 48-month CD, a 36-month CD, a 12-month CD, and a 6-month CD, each with its own interest rate.
• At the end of six months, the shortest CD matures, and you have a decision to make. You can use your initial investment plus interest to pay bills (or anything else you need to do with the money), or you can invest it in another 60-month CD.
• Six months later, the 12-month CD matures, and you do the same thing. You either withdraw the funds or reinvest in another 60-month CD.
• If you continually invest in a longer-term CD, you have a greater chance of capturing the highest rate available at the time. Plus, once you get the ladder moving, you know you'll have at least one CD mature each year.

If you decide that now is a good time to practice laddering, here are a couple of tips to keep in mind:

• If you're nervous about committing your money for years, you can easily invest in shorter-term CDs. For example, you may want to invest in 3, 6, 9, and 12-month CDs and renew them as they mature.
• Your best bet is to avoid withdrawing money from a CD until it reaches its maturity date. Even if you're not hit with an early withdrawal penalty, your CD ladder will have a gap.

You're practically a pro

If you've been investing in CDs for years and have plenty of money at your disposal, our best advice is to date around. Even if you've been working with the same bank or credit union for decades, keep your eyes peeled for higher rates. You're not married to one particular financial institution.

Say you have $10,000 to invest, and your current bank pays an APY of 4.00%. That means you'll earn $400 interest on a 1-year CD. Sounds good, right?

But what if there's an online bank paying 5.50% instead? That means a 1-year CD would earn $550. While $150 difference may not seem like much, that's $150 you have to reinvest.

Unless you're investing through a brokerage firm, there are not typically any fees associated with setting up a CD. In fact, it's tough to find a downside associated with CDs. One huge advantage is deposit insurance. As long as you invest through an FDIC member bank or NCUA member credit union, your deposits are insured for up to $250,000 per depositor.

If you're ready to get started, take one last look at your financial situation. Once you're sure you have enough put away in an emergency fund, figure out how much you can spare to invest and how long you're comfortable allowing those funds to be tied up.

Interest rates won't always be this high, making now a great time to take advantage of attractive APYs.