Where to Keep Money You Need in the Next Five Years

The best place for short-term money starts with a date, not a headline yield. If you will need the full amount within five years, the SEC's Investor.gov warns that a risky investment could force you to sell at a loss. First decide when you need the cash, whether that date can move, and whether losing any principal would derail the goal.

Money you could need at any time: savings or a money market deposit account

A savings account or money market deposit account at an FDIC-insured bank can work for an emergency fund or a goal with an uncertain date. Eligible deposits are insured up to the applicable limit, generally $250,000 per depositor, per insured bank, per ownership category. Check the institution, fees, minimum balance, rate, and transfer timing. Credit union deposits may have NCUA insurance instead. A higher rate is less useful if a fee erases it or you cannot reach the money when needed.

Compare a savings account with a CD using our CD versus savings calculator. It shows assumptions so you can change rates and time horizon as offers change.

Money with a known date: a CD or Treasury bill

A certificate of deposit usually asks you to leave money in place until a maturity date. The CFPB recommends matching that date to your expected need and comparing the early-withdrawal penalty as well as the rate. A bank CD can be FDIC-insured within applicable limits; verify the issuing bank and account ownership. If you may need the cash early, run the terms through our CD penalty tool before choosing a longer term.

U.S. Treasury bills are issued with terms from four to 52 weeks and a $100 minimum purchase. They pay face value at maturity; the difference between purchase price and face value is the interest. They are backed by the U.S. government but are not FDIC-insured deposits. If you hold a bill in TreasuryDirect, selling before maturity requires transferring it to a bank, broker, or dealer; an early sale price can differ from what you paid. Align maturity with the bill you expect to pay. Compare the after-tax assumptions with a CD in our CD versus Treasury tool.

Money market funds are a different product

A money market fund is a mutual fund, not a bank deposit account. The SEC says its yield can change and it is not FDIC-insured; it can lose value. Read the fund's holdings, fees, access rules, and current yield before using one for short-term cash. Do not assume a brokerage cash position has the same protection as a bank money market deposit account.

Keep the goal separate from long-term investing

The archived version of this article grouped stock funds, individual stocks, corporate bonds, and peer-to-peer lending with short-term cash choices. Those products have different risks and do not belong on a simple list of places to keep money needed soon. If the goal is flexible or many years away, a broader investment plan may make sense. For a fixed near-term payment, compare access, principal risk, insurance or guarantee, taxes, and the date cash becomes available. Recheck current product terms directly before opening or buying anything.