Not every dollar belongs in the market.
If you’re setting aside money for something in the next 6 to 24 months (like a move, tuition, travel, or a large purchase) you need a place to hold that cash where it stays accessible, protected, and working (at least a little) in the meantime.
This post covers smart, low-risk places to keep short-term money, and what trade-offs to expect with each.
First, Define “Short-Term”
In financial planning, money you’ll need within the next 1 to 2 years is considered short-term. That’s too soon to invest it in stocks or long-term funds, where returns are unpredictable and losses could take time to recover.
The goal for short-term money is stability and liquidity, not growth.
What to Look for in a Short-Term Account
When deciding where to stash cash you’ll need soon, look for:
- Principal protection: You shouldn’t lose money
- Liquidity: Easy access when you need it
- Low risk: No surprises when markets shift
- Some return: Ideally better than letting it sit in checking
Smart Places to Keep Short-Term Money
Here are several options that strike the right balance between safety, access, and minimal return.
1. High-Yield Savings Account (HYSA)
- Best for: Emergency funds, expenses within 12 months
- Pros: FDIC insured, flexible, easy to access
- Cons: Rate can change, but better than checking
- Current yields: Around 4–5% (as of 2025)
Use if: You want simple, safe access with no risk of loss.
2. Certificates of Deposit (CDs)
- Best for: Cash you won’t need for a fixed period
- Pros: Higher fixed rates, FDIC insured
- Cons: Penalties for early withdrawal
- Current yields: Around 4–5.5% depending on term
Use if: You know exactly when you’ll need the money and want a slightly better return.
3. Treasury Bills (T-Bills)
- Best for: Cash you can lock up for 4 to 52 weeks
- Pros: Backed by the U.S. government, exempt from state tax
- Cons: Slightly less flexible than savings, requires a brokerage or TreasuryDirect account
Use if: You’re comfortable with a bit more setup for safe, short-term yield.
4. Short-Term Bond Funds or Money Market Funds
- Best for: Moderate balances with some return
- Pros: Low volatility, slightly higher yields
- Cons: Not FDIC insured, may lose value very slightly in rare cases
Use if: You want a mix of stability and return and don’t need instant liquidity.
5. Cash Management Accounts (CMAs)
- Best for: All-in-one checking and savings alternatives
- Pros: High yield, flexibility, often sweep into FDIC-insured banks
- Cons: May require a brokerage account
Use if: You prefer managing all your money in one digital platform.
What to Avoid
- Checking accounts with no yield
- Long-term investments for money you’ll need soon
- Risky assets like individual stocks or crypto for near-term goals
Even if you “might not need the cash,” avoid putting short-term money in places where the value could drop right before you need it.
Final Thought
Where you keep short-term money matters. Choosing the right account helps you preserve your flexibility while avoiding the hidden cost of letting cash sit idle. These options give you a range of tools to match your timeline and comfort level—without taking unnecessary risks.
