Normally when you think of investing you think of long term savings goals like retirement. But you can also use short term investments to reach short term savings goals as well.
Some examples of short term savings goals might be saving for the down payment on a house, or saving for a dream vacation. Any savings goal that you needs to reach in less than 5 years could be considered a short term savings goal.
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As women, we sometimes have a fear of investing. We have been brought up to rely on traditional saving to reach our goals.
There is nothing wrong with saving money. In fact, it is key to being financially healthy. However, you should also find ways to start investing your money. Investing allows your money to work harder for you.
Best Short Term Investments
Let’s look at some of the short term investments you can make to start reaching your short term savings goals.
High-Yield Online Savings Accounts
You might not realize it but putting your money into a high-yield online savings account is a way of investing. These accounts have a higher interest rate than the savings accounts offered at your local bank.
The biggest benefit to using high-yield online savings accounts for your short term savings goals is that your money is easily accessible or liquid. However, if you have trouble saving money this might be a bad thing.
Here is a listing of the 5 best online high-yield savings accounts. These accounts have no fees and no minimum balances. They are easy to set up and will allow you to start investing your money into them quickly.
Money Market Accounts
Money market accounts are very similar to savings accounts. However, they normally have higher interest rates and higher deposit requirement. Some also come with checks and debit cards.
Another difference between money market accounts and savings accounts is what the bank can do with your money once you deposit it. When you put your money into a money market account the bank can use that money for things like money market mutual funds, government securities, or certificates of deposit.
However, when you put your money into a savings account the bank can not make loans with your money.
Certificates of Deposits (CDs)
Certificates of deposit are bank deposits where you invest a fixed dollar amount for a specific period of time. The bank will pay you interest for your investment.
CDs come with terms ranging from three months to six years. The longer the term, the higher the interest rate. Banks usually pay interest on CDs annually or semiannually.
Certificates of Deposits are ideal if you have a set deadline for your savings goal and you are looking for a low-risk short term investment. A CD you buy through a federally insured bank is insured for up to $250,000 by the FDIC.
CDs are considered less liquid than some other short-term investments. This means that you are not able to easily access your money. Most CDs include a premature withdrawal penalty if you withdraw your money before the stated term ends.
U.S. Government Securities
U.S government securities are issued by the U.S. Treasury in the form of Treasury bonds, bills, and notes. When you invest in government securities, you are essentially loaning the U.S. government. In return, the government pays you interest.
Government securities come with a promise of the full repayment of invested principal at maturity of the security. The U.S. Treasury offers a number of securities with maturities of five years or less. This puts them in the perfect range for short term savings goals.
All government securities can easily be sold through a broker and turned into cash within a few days.
Leave a comment and share how you invest for your short term savings goals.
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