Every
person should have a short-term savings account or “emergency fund,” a source
of income that they can turn to if something unexpected happens, like a medical
emergency or getting laid-off from work. This account can also be used for fun
things, like a vacation or a small buying splurge.
No
matter what you intend to use your short-term savings for, the fact remains
that you want it to be easily accessible to you. That’s why you shouldn’t store
this money in the form of a risky investment or anywhere that is going to make
it difficult to get when you need it most.
Fortunately,
though, there are a lot of good, secure places that you can put your short-term
savings so that it will be there for you when you need it most.
Option
#1: A Savings Account
One
of the best and simplest options for stashing your cash is a traditional
savings account. Just make sure your account is secure through the Federal
Deposit Insurance Corporation (FDIC) or the National Credit Union Share
Insurance Fund. That way, if something happens with your bank or credit union,
you will still get your money back- up to $250,000 of it. While the interest
rates on these types of accounts are relatively low, they are still a good,
simple solution for storing your cash until you need it.
Option
#2: A Higher Interest Checking Account
If
you just can’t deal with the low interest rates of standard savings accounts,
then you may want to look into a high interest checking account. You can
typically find a very good high interest checking account through a regional
bank or a credit union. Some offer as much as 3% APR on the first $15,000 you
put in your account, and most offer free withdrawals so that you’ll never be
penalized for taking out your cash. There are sometimes a few requirements that
you must meet, such as using your account to make a minimum amount of purchases
per month, but the requirements are well worth it for the high interest rates.
Option
#3: CD Laddering
If
you’re a bit more financially savvy or if you have a good accountant or
financial adviser who can take care of it for you, you may want to consider CD
Laddering as a way to stash your cash. This option is best for storing money
that you don’t plan to use for a minimum of one to two years. It allows you to
invest money in certificates of deposit, each with its own maturity date. The
further away the maturity date, the more interest you will earn; plus, you can
typically renew your CDs as needed. This will ensure that, after awhile, you’ll
always have accessible funds, and that, even when you take out some funds, they
will keep accumulating.
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