By Sabrina Karl

What you gain and what you lose from putting your money in certificates of deposit is clear: You can earn substantially more interest than with a savings or money market account, but you have to lock your money in for a set period of time, paying penalties if you cash out early.

The smartest cash savers have a strategy, though, for balancing this plus-and-minus of CDs, allowing them to squeeze every drop of earnings they can out of their savings. It’s called CD laddering, and it’s an easy rung-by-rung process.

In general, the CDs paying the highest interest rates are long-term certificates, such as 5-year CDs. While you could put all your money into 5-year CDs right away, that offers little flexibility in accessing the cash if you need it.

The antidote is splitting your CD funds into five equal sums and investing them in five certificates of increasing lengths. This will give you access to one-fifth of your funds every year, instead of waiting five years for access.

Let’s say you’re starting with $10,000. This gives you five investments of $2,000 to deposit in five CDs of increasing terms: 1-year, 2-year, 3-year, 4-year and 5-year CDs. Shop around for top-paying offers in each term to assemble a portfolio of nation-leading rates.

When your 1-year CD matures, reinvest those funds in a top-paying 5-year CD. Then a year later, invest the funds from the maturing 2-year CD in another 5-year certificate, and so on. Eventually you’ll end up with all your CD funds earning attractive 5-year rates, but with access to a fifth of your money every year.

Cash savings are important to everyone’s financial picture. And while it’s easy to sock our money away in a simple savings account, the extra steps to create a CD ladder will pay lucrative dividends.