When interest rates get low, you might feel discouraged that your saving isn’t as impactful as before. But if you keep your goals in mind and keep saving, you can still have a great impact on your financial wellness – even when interest rates are low. Check out our 3 suggestions for staying on track.

1. Keep saving

The worst thing you can do when interest rates get low is to stop saving. While interest rates do make a difference to your bottom line, most saving – especially in the short term – comes down to how much money you put in. Consider this: if you save $25 a month by putting it in an envelope, where it won’t earn interest, you’ll still have $300 at the end of the year. So don’t stop saving just because interest rates have gotten lower.

2. Consider share certificate laddering

If you’re looking to save for the intermediate term – one to three years – consider share certificates and share certificate laddering. Certificates (and laddering them) are an especially useful approach if you’re concerned that interest rates will continue to fall in the near future.

Simply put, a share certificate is a certificate of deposit issued by a credit union, which represents a deposit that is made for a certain period of time that earns specified dividends over that period. A typical example of a share certificate would be depositing $500 for a period of one year, in exchange for receiving a specific rate; your dividend plus the $500 would be paid out at the end of the year.

The disadvantage of share certificates is that your money is “locked up” for the period of the certificate – while you do have access to the money if you really need it, using it (by withdrawing or transferring it) will result in a penalty. (When you open a share certificate, the penalties for early withdrawal will be provided to you.)

So what’s share certificate laddering? Essentially, a share certificate ladder is an investment strategy where you invest in a series of individual share certificates with staggered (different) maturity dates. Instead of locking all your money up by opening a single share certificate with a maturity date in the future (say, 3 years from today), you break up your money into smaller dollar amounts to open multiple share certificates with various maturity dates.

Here’s a typical example of a 3-year share certificate ladder: you divide your money up equally into 3 parts and open 3 certificates at the same time. With one part, you open a 1-year certificate, with one part you open a 2-year certificate, and with one part you open a 3-year certificate. This strategy has several benefits:

  1. You’ll have funds becoming available sooner if you need them (versus if all the money were in the 3-year certificate).
  2. If interest rates are higher by the time your first or second certificate matures, you can take advantage of those higher interest rates by opening new certificates at that time.
  3. If interest rates fall in a year or two, you have some money (the 3-year certificate) that is locked in to a higher rate.
  4. Over the duration of your ladder, you will still typically earn more interest than on an average short-term certificate – in other words, your 3-year ladder will typically earn more than if you had put all your money into a 1-year certificate that you kept renewing.

3. Keep your goals in mind

Lastly, keep your goals in mind. Why are you saving? Is it to have money available for your children’s education so they have an easier time at college? Is it to build an emergency fund? Whatever the reason, keep your goal in mind. You can still contribute to tuition costs for your child or provide yourself the peace of mind that an emergency fund brings – even during a period of low interest rates.