Sometimes you need somewhere to park your cash for a year or less. Perhaps you’re saving your money for a house, a wedding, or another financial goal. If you don’t want to tie your money up long-term, here are some of the best short-term investments right now.
At 9.62% annualized, the current rate on I bonds is the highest rate available today on a risk-free investment. The inflation rate will change in November to approximately 6.5%. We’ll know the fixed rate in early November. If you buy an I bond before then, however, you’ll get the 9.62% rate for six months before it changes to the new rate.
You can invest up to $10,000 a year in I bonds plus another $5,000 with a tax refund. The only caveat is that you can’t touch them for the first year. Cash them in within the first five years and you’ll sacrifice three months of interest. Even so, they are a good deal.
There are also strategies for buying more than $10,000 each year for aggressive savers.
Highest Rate No-penalty CD
SaveBetter is a fintech company that partners with banks to offer competitive APYs on savings accounts, money market accounts and CDs. Through SaveBetter, Sallie Mae bank offers a 14-month no-penalty CD that earns 3.30% APY and a 10-month no-penalty CD that earns 3.20% APY. These are the highest no-penalty CD rates I can find available nationwide.
As the name suggests, there isn’t a penalty if you cash out the CD early. As such, these accounts could serve as an emergency fund. You’ll have to withdraw the entire amount and close the account, though—no partial withdrawals allowed.
Highest Rate Savings Account
Fitness Bank offers the highest rate on a savings account at 3.50% APY, but you do have to jump through a few hoops to get that rate. As a “member-athlete,” you’ll need to download an app that tracks your steps, and you’ll need to clock 12,500 steps a day.
Fitness Bank’s website says you can meet these requirements by swimming or cycling, but it’s not clear how much cycling or swimming you need to do or how it counts towards your step goal. If you don’t meet the 12,500 steps, your savings account rate will earn 1.25% APY.
If you don’t want to track your steps, UFB Direct has a savings account offering 3.11% APY with no minimum balance and no fees (and no step count).
Highest Rate Money Market Account
Brilliant Bank’s Money Market account pays 3.15% APY with a $1,000 minimum to open the account. If you don’t want to put down a $1,000 deposit, UFB’s Elite Money Market Account offers 3.11% APY. There is a $10 monthly fee for the UFB Elite MMA, but you can waive the fee by maintaining a $5,000 balance.
Money Market accounts, at least traditionally, offer higher interest rates than savings accounts. This isn’t necessarily true right now, but money market accounts do have the advantage of providing check-writing privileges, and some come with a debit card. If you don’t make a lot of withdrawals, they pay better rates than checking accounts.
Highest 1-Year CD
Parsons Federal Credit Union has a 13-Month CD paying 4.00% APY with a $10,000 minimum deposit. Parsons Federal Credit Union is open to all U.S. citizens and residents with a membership in the American Consumer Council, currently $8 a year, or $15 for a lifetime membership.
If you want a 12-month CD, Merrick Bank has a great rate at 3.90% APY with a $25,000 minimum deposit. If you don’t want to tie up that much cash, CFG Bank has a 1-Year fixed CD with an APY of 3.82% and only a $500 minimum deposit.
1-Year Brokered CD (4.15% at Fidelity)
A brokered CD is similar to a bank CD, only it’s offered through a brokerage. Unlike a CD from a bank, you can buy and sell brokered CDs on the secondary market without paying early withdrawal penalty. However, the CD might lose money when you sell it, especially if CD rates have risen since you purchased the CD. In this way, brokered CDs behave similarly to bonds.
If you have a brokerage account already, brokered CDs can be a good short-term investment. Fidelity is offering a one-year brokered CD with an APY of 4.55%. Note that the APYs change daily.
T-Bills are short-term U.S. bonds that mature in one year or less. These bonds are issued with terms of four, eight, 13, 26, or 52 weeks. Typically sold in denominations of $1,000, investors pay an amount below the bill’s $1,000 face amount. At maturity, you receive the full $1,000 par value. The difference represents the interest earned on the investment.
The current rate for a 6-month T-bill is 4.32% (but changes daily). As a bonus, T-Bills, as with other U.S. government bonds, are not subject to state and local income tax.
A good short-term investment is stable and has no or very low fees. Since you’re counting on the money being available in six months or a year, a low-risk, guaranteed rate is best. In general, short-term investments are more stable than long-term investments, but you should consider the investment that works best for you.