Are you looking for the best places to park your cash? With so many options out there, it can be challenging to know where to start. From high-yield savings and money market accounts to CDs and Treasury bills, there are plenty of choices now that interest rates are higher than in years.
But which should you choose? Keep reading to learn more about the best places to park your cash.
High-Yield Savings Accounts
A high-yield savings account may be a good option if you’re looking for a low-risk place to store your cash. These types of accounts typically offer higher interest rates than traditional savings accounts, and they also come with FDIC insurance of up to $250,000 per depositor.
You can use these accounts for everyday expenses or as an emergency fund in case of unexpected expenses. They are also ideal for short-term goals such as buying a car or paying for college tuition.
If you plan to save for multiple goals, a great trick is to open an account for each goal to make tracking and monitoring easier.
Money Market Accounts
Money market accounts offer many of the same benefits as high-yield savings accounts but with slightly higher interest rates. These accounts often have higher minimum balance requirements than savings accounts, but they may still be worth considering if you’re looking for a safe place to store your cash.
Money market accounts are FDIC insured up to $250,000 per depositor, just like high-yield savings accounts, so you don’t have to worry about losing your money if something happens. However, in many cases, you need to have $5,000 or more to earn higher interest rates.
Certificates of Deposit (CDs)
Certificates of deposit (CDs) are another great option if you want a safe place to park your cash. CDs offer fixed interest rates over set terms, usually from three months to five years or more. The longer the term of the CD, the higher the interest rate will typically be.
However, remember that most CDs require you to leave your money in them until they mature to get the full benefit of any interest earned on them. Otherwise, you are charged a penalty of three months of interest.
Worthy Bonds are a relatively new option that offers low risk and moderate returns. You can purchase Worthy Bonds in $10 increments and set your account to round up your purchases, so you invest your spare change. You earn a flat 5% on your money and can withdraw it without penalty.
The main downside is the rate is fixed, so if interest rates climb higher than 5%, you won’t benefit by putting your money in this investment.
Short Term Bonds
Short-term bonds typically have maturities of three years or less, so they offer the potential for higher returns than savings accounts or money market accounts. The interest they pay varies but is competitive with the other options on this list. The additional benefit is interest is paid monthly, so if you need some income, you can get it with short-term bonds.
However, remember that bonds also come with additional risks, such as interest rate and credit risk, so it’s essential to do your research before investing in them. We saw this play out in 2022 as the Federal Reserve raised interest rates. Short term bonds lost money as investors fled for higher-yielding alternatives. One way to avoid this is to invest in ultra-short-term bonds.
Treasury Bills (T-Bills)
Treasury bills (T-bills) are short-term debt securities issued by the U.S. government with one year or less maturities. They typically offer low-risk, low-return investments and are backed by the full faith and credit of the U.S. government.
T-bills can be purchased directly from the government or a bank or broker. The biggest downside is interest is not paid until maturity, so if you are looking for monthly income, you won’t get it by investing in T-Bills that mature in greater than 4-week increments.
I Bonds are inflation-protected securities issued by the U.S. government with maturities of up to 30 years. They earn interest linked to inflation and offer a guaranteed rate of return, making them an excellent choice for long-term investors looking for a safe place to park their cash.
The biggest downside to I Bonds is that you must keep your money invested for one year, and if you redeem before five years, you pay a small penalty.
Higher interest rates give you many more options for parking your cash. The downside is that you must do more work to determine the best. Of course, you can be strategic with these short-term savings options and put your money into multiple options.
This will spread your risk out and help you achieve the maximum return on your money while still having access to it when needed.