My Friend Built a $60,000 CD Ladder. Here's How Much It Pays Him Monthly

Most people stash their emergency savings in a high-yield savings account -- which is a solid idea. But my buddy stores his $60,000 in savings a different way.

He built a CD ladder that pays him every month like a self-funded paycheck.

His logic is that if (when) something bad happens -- like losing his job -- he probably wouldn't need all $60,000 on day one. He'd just need a few grand each month to cover bills.

So he split his emergency fund into 12 $5,000 CDs, each with a 12-month term, staggered monthly. That way, one CD matures every month, and he can roll it over or cash it out as needed.

It's a simple move, but it locks in a higher interest rate for most of his cash than a savings account could.

The setup: 12 CDs, 12-month terms, $5,000 each

Here's the gist of how his CD laddering strategy was built:

• He split $60,000 into 12 separate CDs, each with a $5,000 deposit.
• He bought all the CDs on a rolling monthly basis.
• That means one CD matures each month, freeing up $5,000 (plus interest).
• When a CD matures, he simply rolls it into a new 12-month CD at the current best rate. (Or he can use it in case of emergency.)

It's quite genius, actually. He has regular access to his cash, pays no penalties or fees, and earns the best available APYs for 1-year CDs every month.

Want to copy this setup?

So how much does he earn?

Let's do the math based on the best 1-year CD rates right now -- we'll use a 4.00% APY as a rough average.

Each $5,000 CD earns around $200 per year, or roughly $16.67 per month.

Multiply that by 12 CDs, and he's bringing in around $200 per month in passive income, or $2,400 per year.

Truth be told, he began this ladder strategy a couple years ago when rates were even higher. So he's probably earning even more because some of his older CDs are probably still paying higher rates.

That's the beauty of laddering, and why it's important to lock in good rates before they drop. The Federal Reserve is meeting again on June 17-18, and if they decide to cut rates, today's top CD offers could disappear fast.

Is CD laddering right for you?

I'll be honest -- personally, I don't keep my own emergency fund in a CD ladder. I use a high-yield savings account.

I know CDs might pay me a tiny bit more in interest. But I feel better knowing I can access all of my cash at any moment if I need to. It's a security thing, I guess.

That said, CD laddering makes a ton of sense for people who want to earn more on their cash without giving up all their access. Especially if you've got a large emergency fund or money earmarked for a goal that's still a few years out (like buying a house).

If you're sitting on a chunk of cash and want to earn more without taking on risk, a CD ladder could be your next smart move. It's low-effort and low-risk, and you can customize it however you want.

Start by exploring the top CD rates available right now -- our team updates the list regularly so you can lock in a great APY before rates drop.