The Short and Long of It

Where to stash savings according to time length

How — and where — you save your money can depend on the goals attached to those funds. Are you saving for something two years down the road or 20? Here’s a breakdown of where to stash cash, sorted by time frame.

Short Term Savings

Short term savings are accounts that can take only a few years to pad and are for goals that are within a few years in the future. Examples include a vacation fund, an emergency savings account or a down-payment on a new car.

  • A high-rate savings account. Search for a high-yield savings account. A good place to start is a credit union or local community bank, both of which typically offer better rates than big banks. A high interest rate savings account also gives you quick access to the cash if you need it.
  • A money market account. As Marketwatch notes, a MMA usually offers higher than average savings rates, but the minimum deposit and balance guidelines can also be quite high.
  • Medium Term Savings

    Medium term savings are accounts that can take two or more years to pad, they are for goals that are more than a couple of years in the future. Examples include a down-payment on a house or a wedding fund.

  • A high-rate savings account. Again, for a medium-term goal, a high interest rate savings account is a good place to stash cash.
  • Certificate of Deposit. A CD is a good place to save for a medium-term goal that has a specific date attached to it (like a wedding). If you know you’ll want/need the cash in two-to-five years, try a CD, which can offer above average savings rates. Again, start with checking rates at your local financial institution.
  • Long Term Savings

    Long term savings are accounts that can take 10 or more years to pad and are for goals that are at least that far away. Examples include a college fund or retirement savings.

  • A tax-advantaged retirement account like a 401(k) or IRA. If saving for retirement, max out your 401(k) and/or IRA. Both offer good returns, as long as you hold onto them for many years.
  • A tax-advantaged account tied to another goal like a 529 college savings account or Health Savings Account (HSA). If tax-advantages are on the table, you want to grab them.
  • A discretionary brokerage account. If you can keep your eye on the big picture, stash cash in the stock market and enjoy healthy returns over the long haul.
  • Chris O'Shea

    Chris O'Shea