Savings Plan Option for Short-Term Investment

Obviously, maintaining funds in a checking account is both liquid and safe. In addition, there's federal deposit insurance to protect your funds, and you can always get easy access to your money at any time, knowing that it's secure. But, in a checking account, you will not earn any return.

So, it should be kept somewhere other than your checking account that is both safe and earns some potential returns. Why not consider a short-term savings plan option? There are several savings plan option for short nyt that offer solid returns while keeping your funds accessible. Read on to learn about the various options available to save money for a short period.

Certificates of Deposit

The safest short-term investment is a CD, usually issued by most large banks. You deposit money in the bank for a particular period. At the maturity date, you get back your original amount plus an amount added as interest based on the predetermined rate when depositing. The greater the duration of the term on a CD, the better the interest rate.

You can receive a CD for extremely short terms, sometimes even as short as one month. You can also opt for a longer-term CD that is three years or five years old.

CD's are FDIC-insured, thereby significantly reducing the amount of risk incurred. The returns can be quite low in comparison to the returns obtained with other investments. Thus, it is highly suited for building relatively minor wealth that may not incur too much risk.

A money market account

Money market accounts are basically checking and savings accounts but with a higher interest rate. You can generally debit or write a check against them, but there may be a limit to these actions.

Money market accounts represent a good way to receive interest without thinking much about actual investing decisions. The risks involved in this account are low as they are FDIC-insured.

The potential return isn't high with money market accounts, but it is generally better than letting your money sit in the normal checking account. So, it makes sense for investors who simply want to earn some passive income but not necessarily those who want to actively grow their portfolio.

U.S. Treasury Notes

Another low-risk, short-term investment alternative is purchasing notes from the United States government. The return on the notes is not very high, and interest is not earned more than 2.50% every six months. However, the returns are very low in risk.

With notes, you are basically lending to the federal government. You can buy the note and start receiving interest payments every six months until a predetermined maturity date.

Maturity dates vary, from one to two to several months and you can either purchase notes directly or invest in a mutual fund or exchange-traded fund (ETF) that invests in notes.

Treasury Bills

Treasury Bills are some short-term plans issued to investors by the United States government. They are a safe and excellent way to invest and are sold at a discount at face value.

They mature within a few days to one year, and the government pays you the full face value at maturity. Your difference between the price or profit earned is referred to as the yield.

T-bills are nearly risk-free and backed by the full faith and credit of the U.S. government. Additionally, the interest income is exempt from state and local taxes, which can be a significant plus for high-tax investors. T-bills can be purchased directly at TreasuryDirect.gov or invested in via exchange-traded funds.

High-Yield Savings Account

Perhaps the easiest way to improve your return on your short-term savings plan is to move them out of a checking account and into a high-yield savings account, or HYSA. The trade-offs for moving your money elsewhere are minor, and you will give up conveniences like ATM access and check writing, but you will gain the ability to earn substantially higher annual percentage yields.

Also, your money still remains liquid and safe in a checking account. It is protected by the Federal Deposit Insurance Corp or some other administration.

When selecting HYSA make sure to compare different accounts with competitive promotional APYs. Do these accounts have minimum balances? Are there monthly maintenance fees or promotional rate expiration dates that could affect my ability to earn? Consider these points before selecting the short term savings investment option.

Wrapping it Up

While looking at a savings plan option for a short crossword clue, it's extremely important to balance safety and liquidity with potential returns. Align your choice with your short-term financial goals, and determine whether you are building an emergency fund or keeping money aside for a short-term objective. This will help you to select the right short-term savings plan investment option.

The best savings plan option for short-term investment is one that fits your financial needs, provides reasonable returns, and ensures liquidity without compromising security. Compare your options with the rates, fees, and terms to select the best one.