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6 Best Short Term Investments for Flexible Savings Goals

Short term investments, like money market accounts or certificates, are more flexible and less risky than stocks or other investment opportunities.

What are short-term investments, and what can they do for you?

The best short term investments keep your money safe while giving you the flexibility to access your money if you need it. While they typically have lower returns than longer-term investments, the Federal Reserve has recently made efforts to control inflation, leading to higher dividend or interest rates and better returns in various short-term investment options. Learn more about  Learn more about the relationship between inflation and interest rates. Now there is more incentive than ever to find the best short investment for your money.

Key points:

  • Short term investments keep your money safe and give you the flexibility to access funds while you earn.
  • Make short term investments when you have a specific savings goal with a shorter or less predictable timeline.


Top 6 best short term investments:

  1. Money Market Accounts
  2. High-Yield Savings Accounts
  3. Term Certificates or Certificates of Deposit (CDs)
  4. Money Market Mutual Funds
  5. Short-Term Government Bonds
  6. Treasuries


Short term investments vs. long term investments

Short term investments typically involve funds set aside for less than three years, often for specific purposes like a down payment on a house, funding a wedding, or taking that dream vacation.

If your time horizon extends beyond three to five years, you might consider investments like a diversified portfolio of stocks and bonds. While stocks offer higher returns, the stock market's historical ups and downs require a longer investment horizon, so this option is not for the faint of heart. On the other hand, investment options with shorter terms can offer more stable rates of return with less volatility.

Here’s an example of where short term investments might come in handy:

You want to have a savings built up in case of an emergency. You never know when there might be an emergency. Hopefully never! If and when the time comes, you don’t want to deal with added fees or restrictions for withdrawing funds.

A savings goal like this, without a specific timeline, suits a shorter term investment much better than a longer term investment. Read more about different types of investments in this article.


6 best short-term investments for flexible savings goals

When it comes to making short-term investments, there are a handful of options, but here, we’ll delve into some of the most popular and reliable short-term investments.


1. Money Market Accounts

  • Summary: These are dividend-bearing deposit accounts offering higher dividends than regular savings accounts and are federally insured up to $250,000.
  • Who are they best for? Ideal for those looking to maximize growth on their savings while also retaining short-term access to a it, without strings attached.
  • Risks: Rate isn’t guaranteed and might change as the market changes.
  • Rewards: Earn interest with short notice access to funds.
  • Liquidity: Highly liquid, with some federal restrictions on withdrawals.
  • Where to get them: Available at many credit unions and banks. Check out SF Fire’s Money Market Account with no monthly fees and no minimum balance.



2. High-Yield Savings Accounts

  • Summary: These accounts provided by banks or credit unions offer a good alternative to traditional checking accounts.
  • Who are they best for? Ideal for people who want short-term access to cash without risking returns.
  • Risks: FDIC or NCUA insurance keeps your money safe, but long-term investors may face challenges with inflation.
  • Rewards: Online banks often offer higher interest rates.
  • Liquidity: Highly liquid, with some withdrawal restrictions.
  • Where to get them: Compare high-yield savings accounts to find the best rates.



3. Term Certificate also known as Certificates of Deposit (CDs)

  • Summary: Certificates are designed for saving and earning dividends on funds not needed in the immediate term, but still available in the shorter term. Unlike other short-term savings accounts, you’ll have to commit your funds for a fixed period.
  • Who are they best for? Ideal for those aiming to maximize savings growth with short-term access, without strict withdrawal conditions.
  • Risks: Look for FDIC-insured options to protect against potential losses.
  • Rewards: Earn higher dividends at a fixed-rate with relatively short notice access to funds.
  • Liquidity: Not liquid, with withdrawal restrictions.
  • Where to get them: Available at many credit unions and banks.



4. Money Market Mutual Funds

  • Summary: Different from money market accounts, they invest in short-term securities, offering yields.
  • Who are they best for? For those looking for cash access with some yield.
  • Risks: Not as safe as money market accounts but generally safe.
  • Rewards: Investors earn a yield with nominal fluctuations in the principal.
  • Liquidity: Reasonably liquid, with easy access to money.
  • Where to get them: Available through most full service brokerage firms.



5. Short Term Government Bonds

  • Summary: Similar to corporate bonds but issued by the U.S. federal government and its agencies.
  • Who are they best for? Suitable for risk-averse investors seeking a very safe investment.
  • Risks: Potential to lose principal if you sell early, especially with today’s increasing interest rates.
  • Rewards: Reliable interest rates, though lower than corporate bonds.
  • Liquidity: Highly liquid, widely traded on exchanges.
  • Where to get them: Available at online brokers offering ETFs and mutual funds.



6. Treasuries

  • Summary: Government-backed bonds that come in various forms, with T-bills being short-term.
  • Who are they best for? Buying individual treasuries is better for those who know what they want.
  • Risks: Not FDIC-insured but considered highly safe due to government backing.
  • Rewards: Treasury bills are among the safest investments, though with lower yields.
  • Liquidity: Highly liquid, the most traded bonds on exchanges.
  • Where to get them: Purchase from the government on TreasuryDirect.gov or any full service brokerage firm.




No matter what your specific needs are, there are options when it comes to short-term investments. Whether you're saving for a specific goal like a down payment or simply want an emergency fund, short-term investments provide stability and opportunity. Remember, short-term investments offer a balance of security and growth, ensuring your money works for you in the present while setting you up for future success.

Explore the variety of options available and find the best fit for your situation. If you need help deciding which is best for you, we’re always here. Get in touch via phone, web chat, or in person.

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