There are a lot of good reasons to hold cash. An emergency fund is a must. Then there’s saving for a home or vacation. Whatever the reason, the big question is where are the best short-term investments to park your money.
We’re in an historically low interest rate environment. In a Consumer Reports article from just two years ago, June 2019, it shows interest rates ranging from 2% at Sallie Mae to 2.75% at First Internet Bank.
Unfortunately, those days are behind us. They’re probably ahead of us too. I’m going to make a prediction that eventually we’ll get back to those rates. But right now, most big banks are paying about one basis point (0.01%).
You can do better. Here are 7 of the top short-term investments for your money.
Best Short-Term Investments for Saving Cash
1. No-Penalty CD
This has been my choice lately. As the name suggests, a no-penalty CD doesn’t charge a penalty for early withdrawal. You get the higher yields of CDs with the flexibility to pull your money out at any time.
Typically you pay for this no-penalty feature with a slightly lower APY. Right now, however, Sallie Mae is offering a 14-month no-penalty CD that pays 2.50% APY. This offer is only available through a service called SaveBetter. It’s the best deal I’ve been able to find, and I’m moving my cash to this account now.
Featured Offer: Sallie Mae 14-Month No Penalty CD
2. U.S. Government Treasury Bills
Treasury bills are U.S. government bonds that mature in one year or less. The government issues them in terms of 4, 8, 13, 26, and 52 weeks. They are zero coupon bonds. You buy them for less than face value, and receive the face value when the bond matures. The difference represents your interest.
You can buy Treasury bills via Treasury Direct, but I wouldn’t recommend it. The website is a mess. A better approach is to buy them through your broker of choice. Fidelity, Schwab and Vanguard are all reasonable options.
Current yields range from about 2.25% to just under 3%. These yields change daily, so be sure to check out current yields here.
3. High-Yield Savings Account
For those who want a straight up savings account, there are several today that pay north of 2.00% APY. The highest APY I can find on a savings account available nationwide without savings caps is My Banking Direct (2.20% APY). Let me know if you find a better offer.
4. High-Yield Money Market Account
When it comes to saving cash, there really is no difference between an FDIC-insured savings account and an FDIC-insured money market account. Sometimes, however, you’ll find that one or the other pays a slightly better rate.
The best MMA rate I can find comes from the Merchants Bank of Indiana (2.28%).
5. High-Yield Checking Account
If you want to keep your money in a checking account, there are some high-yield options. One of the best rates out there is from SoFi (1.80% APY). The rate applies to both the SoFi checking and savings account, but does require direct deposit to qualify.
6. Business Checking
For small business owners and freelancers that have a business, Bluevine is an excellent choice. Bluevine is very similar other neobanks except it’s for small businesses. It pays 1.50% on balances up to $100,000. There is no interest earned on balances over 100,000.
7. Fitness Bank
The last one on our list is called Fitness Bank. They tie the interest rate you can earn by how many steps you walk each day. Seriously. They pay up to 2.30% APY. You have to average 12,500 steps a day to earn this rate and have both a checking and savings account (2.20% with just a savings account). If you get at least 10,000, you can earn up to 1.25%. Even if you sit in a barcalounger all day you’ll earn 0.50% APR
If you’re a senior citizen at least 65 years of age they cut you a break. You get the top rate at 10,000 steps. You do have to download their app and wear an approved fitness tracker, which include Garmin, Fitbit, Google Fit and Apple Health.
If you can wait at least 12 months before accessing the money, I Bonds are the best risk-adjusted return you can get today.