About · Press · Contact · Write For Us · Top Personal Finance Blogs
Featured In:

Question: Where Should I Park My Short-Term investments?

By Erik Folgate

When it is all said and done, there are only two kinds of investments — long-term and short-term.

Long-term investments should be money that you are not going to touch for more than 5 years.  This category involves retirement planning and overall wealth building.  This money does not need to be as liquid as short-term investments, meaning you can put the money in real estate or a start-up business.

Short-term investments should be money that you need to be more accessible and readily available for you to use at short-term notice.  Short-term investments should be savings for things that are less than 5 years down the road.  This might include saving for a car, a down payment on a house, car/house maintenance, or other high dollar personal items. 

My best friend asked me the other day where he should start putting aside some short-term investment money.  He realized that the local banks have piss poor investment products like their savings accounts that make 0.00011352354% annual interest or their money market accounts that make about 2/10’s more annually.  (i’m exagerrating if you have not noticed yet).  Anyway, I referred him the wonderful world of internet banking. 

ING Direct has its Orange Savings Account that average a 3.8% to 4% annual interest rate, which is not too shabby.  ING’s accounts are all FDIC insured, as well.  Emigrant Direct and HSBC direct are two other banks that offer online savings accounts at great rates like 4.25% and 4.8%, respectively.  I like ING direct because of their transfer and automatic transfer features. 

Paypal has an option to where someone can turn their account into a money market account, and I believe it currently makes around 4.5% annually.  The only difference is that this account is not FDIC insured as the other three are insured by the FDIC. 

Let’s face it, you are not going to get rich off of these returns, but they are the best alternative to letting it rot in a Bank of America or Wachovia savings/money market account.  The only downside to the online acocunts is that it takes 2-3 business days to transfer money back and forth from the savings account to your checking account.  You just have to be more mindful of events coming up, so that you can plan for transferring the money ahead of time into your checking account.

I would not bother with a Certificate of Deposit at your local bank.  In my opinion, they are a waste of time with the advent of online savings accounts that offer great interest rates.  You can probably find a 5-6% 5 year CD, but then your money is tied up for that long!  And believe me, there is ALWAYS a hefty penalty for taking it out before the maturation of the CD. 


Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

Related Articles

  • http://www.irateinvestor.com Phil

    One caveat about the HSBC rate: it’s only in effect until April 30th. After that, it changes to whatever they decide, which will probably be much lower.

    I’m a fan of a safe bond fund like Vanguard Total Bond Market Index (VBMFX) http://flagship5.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0084&FundIntExt=INT
    The yield is currently above 5% and it holds mostly 5 year US Treasuries and AAA-rated corporate bonds, which only have a tad more risk than an FDIC-insured account (realistically, it’s the same, since the chances of the FDIC staying together if the US gov’t and every major corporation failing is pretty unlikely).

  • http://www.moneycrashers.com Erik

    That is a good point about the HSBC account. All of the internet accounts are boasting a higher return for new deposits up until the tax deadline. After that they will probably drop about a .5% point.

    thanks for the tipe about the vanguard fund. I will check it out.

  • http://www.bondsbonds.com/ municipal bonds

    Greetings every one!! My name’s Carolyn Floyd from Birmingham. I argree, I love your blog site and wish you great success!

The content on MoneyCrashers.com is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers. We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.

Advertiser Disclosure: The offers that appear on this site are from credit card companies from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, U.S. Bank, and Barclaycard, among others.