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Banking

Short-term investment vehicles offer stability, low risk, liquidity and diversification — here are 5 of the best options to consider

This is where to park the cash you'll need within five years.

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Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC Select will update as changes are made public.

There are many good reasons why you would want to invest your money in the short term. Perhaps you intend to use that cash to buy a new car, fund a first-time mortgage, plan a wedding or simply want to build an emergency fund.

For all these goals, cash needs to be put someplace where it's safe and accessible on a whim. Enter short-term investment vehicles: the perfect place to stash the cash you'll need within the next five years.

Though short-term investments typically come with lower rates of return than long-term investments, they can diversify your income and offer flexibility when you need it. Short-term investments stand out for being highly liquid, stable and relatively low risk, so you can count on your money being there when you need to withdraw it quickly at low (or no) cost.

Best short-term investments

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High-yield savings accounts

High-yield savings accounts are as safe and as easy to access as your traditional brick-and-mortar savings account at a big bank, but offer a much higher return (both accounts' APYs are variable rates).

You can rest assured that your money is protected through FDIC insurance up to $250,000 per depositor per bank, and you can make deposits into your account at any time. Keep in mind that although the Federal Reserve removed Regulation D — which limited "convenient" withdrawals and transfers to no more than six per month — banks generally still enforce this restriction.

The high-yield savings accounts below offer above-average APYs and don't enforce a limit to the number of withdrawals or transfers you can make. Both the Lending Club High-Yield Savings and UFB Secure Savings also provide you with a free ATM card, making it easy to access your savings account on the go.

LendingClub High-Yield Savings

LendingClub Bank, N.A., Member FDIC
  • Annual Percentage Yield (APY)

    5.00%

  • Minimum balance

    No minimum balance requirement after $100.00 to open the account

  • Monthly fee

    None

  • Maximum transactions

    None

  • Excessive transactions fee

    None

  • Overdraft fees

    N/A

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes

Terms apply.

UFB Secure Savings

UFB Secure Savings is offered by Axos Bank ® , a Member FDIC.
  • Annual Percentage Yield (APY)

    Up to 5.25% APY on any savings balance; add a UFB Freedom Checking and meet checking account qualifications to get an additional up to 0.20% APY on savings

  • Minimum balance

    $0, no minimum deposit or balance needed for savings

  • Fees

    No monthly maintenance or service fees

  • Overdraft fee

    Overdraft fees may be charged, according to the terms; overdraft protection available

  • ATM access

    Free ATM card with unlimited withdrawals

  • Maximum transactions

    6 per month; terms apply

  • Terms apply.

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a Member FDIC.
  • Annual Percentage Yield (APY)

    4.40% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

CDs

A certificate of deposit, or CD, is another type of deposit account that is federally insured for $250,000 per depositor per bank — meaning your cash is safe up to that limit.

CDs differ from high-yield savings, however, in that they're not as accessible. Traditional CDs lock up your money for a specified amount of time, but the key is that you pick how long so you know what to expect. CD term lengths vary, typically ranging between three months and five years, and usually the longer the term, the higher the fixed interest rate offered.

CDs can be good vehicles for short-term investments because in a high-interest-rate environment, they allow you to lock in a good rate for, say, three years, at which point you may plan to be ready to buy a house. With a CD, you make a one-time deposit when you open the account and don't keep contributing to it like you do with a savings until the CD term length is up.

If you feel that you need greater access to your cash or don't necessarily want to commit to locking it up, you can go with a no-penalty CD, which allows for easy withdrawals cost-free (just make sure the rate offered is worth it). Other types of CDs exist, too, such as add-on CDs that allow for making additional contributions.

Banks like Ally Bank and Synchrony Bank offer no-penalty CDs.

Ally Bank® CDs

Ally Bank® is a Member FDIC.
  • Annual Percentage Yield (APY)

    From 3.00% to 4.50% APY

  • Terms

    From 3 months to 5 years

  • Minimum balance

    None

  • Monthly fee

    None

  • Early withdrawal penalty fee

    High Yield CDs and Raise Your Rate CDs have early withdrawal penalties that vary based on your CD term. With the No Penalty CD, withdraw all your money any time after the first 6 days following the date you funded the account and keep the interest earned with no penalty.

Terms apply.

Synchrony Bank CDs

Synchrony Bank is a Member FDIC.
  • Annual Percentage Yield (APY)

    From 0.25% to 5.15% APY

  • Terms

    From 3 months to 60 months

  • Minimum balance

    None

  • Monthly fee

    None

  • Early withdrawal penalty fee

    There may be an early withdrawal penalty if you withdraw funds from the principal prior to the CD maturity date (the last day of the CD term). The penalty is applied to the amount of principal withdrawn (there's no penalty on interest). For the No-Penalty CD, early withdrawals are not permitted within the first 6 days after account funding. Following that, only withdrawal of the entire balance is allowed.

Terms apply.

APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest for your CD type in effect at that time.

Money market accounts

The third deposit account on this list, money market accounts, or MMAs, are also stable vehicles for your short-term investments because they offer FDIC insurance up to the standard $250,000 per depositor per bank.

With MMAs, you can deposit cash at any time and the same six-per-statement-cycle withdrawal or transfer limit may apply, depending on your bank. MMAs offer variable interest rates and checking account features, such as check-writing privileges, debit cards, ATM access and out-of-network ATM fee reimbursements. Cash withdrawals from an ATM isn't typically part of any imposed limit, so this allows you to always access your cash directly and immediately.

Ally Bank and Sallie Mae both offer top-notch money market accounts.

Ally Bank® Money Market Account

Ally Bank® is a Member FDIC.
  • Annual Percentage Yield (APY)

    Up to 4.25% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Offer checks?

    Yes

  • Offer debit/ATM card?

    Yes

Terms apply.

Sallie Mae Money Market Account

Sallie Mae is a Member FDIC.
  • Annual Percentage Yield (APY)

    Up to 4.65% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Offer checks?

    Yes

  • Offer debit/ATM card?

    No

Terms apply.

Government bonds

Issued and backed by the U.S. government, government bonds are very safe and low-risk, making them ideal as short-term investments. Plus, they offer reliable income. The market for U.S. government bonds is also highly liquid, so you can sell and access your money easily. The best way to buy government bonds is directly through the government's TreasuryDirect.gov.

In addition to purchasing bonds directly, you can also invest in a government bond fund. Bond funds give you access to various types of bonds so you can invest in a mix.

Treasury bills

Treasury bills, or T-bills, are a type of fixed-income security issued by the government with a short maturity term of within a year. T-bills are nearly risk-free and highly liquid, which means they are very safe places to park the cash you'll need soon.

Keep in mind, however, that T-bill returns typically react inversely with the Federal Reserve benchmark rate; a higher rate set by the Fed means lower returns on T-bills. In contrast, high-yield savings and CDs usually raise their rates as the benchmark rate goes up.

You can purchase T-bills directly from the government via TreasuryDirect.gov or through brokerages like Fidelity and Charles Schwab.

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance according to the investment strategy chosen

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)

  • Bonus

    Find special offers here

  • Investment vehicles

    Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®

  • Investment options

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

Terms apply.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

  • Bonus

    None

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

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Bottom line

Short-term investment vehicles are a smart choice for those who are looking to prioritize stability and accessibility when it comes to their money, rather than the highest return. In addition to being highly liquid, most accounts on this list are FDIC-insured so your investments are protected. And you have options, from a high-yield savings account, CD and money market account, to government bonds and Treasury bills.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every investing guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investment accountsWhile CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. 

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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