Solutions For Short-Term Savings
The quickest way to double your money is to fold it in half and put it in your back pocket. - Will Rogers
Short-term savings are generally best kept in bank savings accounts. I define short-term savings as emergency funds (6-12 months of monthly expenses) and planned spending within the next 12 months. These accounts pay almost no interest, and there’s the rub!
When our investments perform well, holding cash in savings accounts feels like a lost opportunity, with inflation slowly eroding the spending power away. Nevertheless, savings accounts are often still the right tool for the job of keeping short-term money available.
Online personal savings accounts are popular solutions. These are great because they earn a better return (than a local bank) with complete liquidity. The following are popular options:
Ally is a particularly innovative solution! Their current interest rate is competitive, and they have some cool features that the other two don’t. For instance, Ally online savings accounts can be divided into named buckets for different goals without opening separate accounts.
A couple of years ago, the going rate was 2% on these (online savings) accounts, but returns are much lower these days. Still, opening these accounts takes minutes, and transferring money to and from is easy. It’s just a real simple solution that works well for many.
Information provided in this article was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy. It is important to know that historical performance does not predict future performance and that significant losses can occur in your investments. The performance of an account is impacted by numerous economic and market factors and all performance noted is net of advisory fees. Accounts are traded differently so performance and holdings may vary between accounts with similar objectives.