It’s important to preserve money in a way that can be used immediately during sudden crisis or events. Examples include sudden emergency, in the wake of expenditure or to invest money in good investment options. There are various ways in which you can preserve your money for such events to be used effectively. Each option provides you with certain benefits in terms of risk, return & liquidity factors.
In this article we present to you, some best short term investment options and their risks for you to choose from. Let’s begin with the first one which is checking accounts.
Checking accounts facilitate the ease of withdrawal & deposit of cash. However, these accounts don’t give you any significant interest. Therefore, it’s not a viable option to preserve your money for short term transactions. However, they are very convenient when it comes to depositing & writing checks, gaining access to ATMs & automatic transactions such as payment of bills. Some checking accounts demand certain fees & minimum balance requirements. Hence, you should keep in mind all these factors before you open a checking account.
Savings accounts give greater returns than checking accounts. However, savings accounts offer lower rate of returns. Savings account is a secure place to preserve your money temporarily. It can also be used in parallel with your checking account to manage your basic personal finances.
Money market accounts
Banks or other brokerages usually manage these money market accounts. Therefore, they are convenient if you want to preserve money for future investment decisions. However, don’t expect sizeable returns because the returns are fairly low. In terms of services, these accounts offer similar services like the checking accounts. However, there are limited transaction facilities unlike checking accounts.
Money market funds
Money market funds signify investment options which are highly liquid & offer marginally greater returns than the previous options. Brokers manage such funds. Money market funds are utilized to preserve money which is currently not invested. Money market funds are not FDIC insured unlike the bank accounts & money market accounts. However, the risk is very low.
Certificates of Deposit
Certificates of Deposit are also known in short as CDs. CDs offer greater rates of return for your invested money. However, if you withdraw money before the maturity period then they charge a penalty. Certificates of Deposit are safe investment options & are FDIC insured.
Treasury securities & bonds offer modest returns & are highly liquid which is convenient for short-term storage purpose.