Where to Keep Your Short-Term Savings

This week, Maggie is answering a listener question about where to put short-term savings.

It’s a short one this week! Maggie is answering listener Samantha’s question: “What are the best places to put money that you want to save in the short term, like for a bigger purchase (5–12k) in the near future (2-5 years)?”


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The theme music is called Escaping Light by Aaron Sprinkle. The podcast artwork design is by my dear husband, Dan Rader.


Maggie Germano: 00:00 Hey there and welcome to the money circle podcast. My name is Maggie Germano and as always I am your host. This podcast is a safe place for women to learn about money and make it a less scary, less taboo topic. Each week I’ll either interview an awesome woman about a specific topic or I’ll answer a listener question. This week I’m answering a question from Samantha in New York. Samantha writes, what are the best places to put money that you want to save in the short term, like for a bigger purchase between 5,000 to $12,000 in the near future between two to five years? This is a great question because sometimes it’s hard to know where to hold your money and have it work best for you. There are lots of options out there so it can be hard to know even where to start to get right to the heart of it.

Maggie Germano: 00:53 I’ll tell you that any money you know you’ll want to use within five years, you should make sure it’s easily accessible to you. That means that you don’t want it to be in the stock market. The stock market can be volatile, which is typical and it’s okay when you can keep your money in the stock market for years or decades. That’s why putting your retirement funds in the stock market is a great idea over the course of your career. It has time to recover and grow again, but when you know that you’ll need that money sooner, you don’t want to risk losing some of it to that volatility and not have the time for it to rebound. That means that money you want to use within two to five years should either be kept in a high yield savings account or a CD. If you know for certain that you won’t need that money sooner than that time frame, a CD could be a really good idea, especially if the interest rates are higher than in a bank account.

Maggie Germano: 01:42 Another really awesome reason to use a CD rather than a high yield savings account is if you know that you tend to be really tempted to spend your money when it’s in savings. That if it comes down to it, you’re pretty likely to be transferring your money into your checking account to spend it rather than setting it aside for this. The bigger goal, using a CD is a good idea because there are penalties for withdrawing earlier than the timeframe that that CD is set up for. So if you know that you have this one specific goal that you’re trying to reach in five years and you don’t want to risk spending that money on something that is not for that goal, putting it in a CD is a great idea. But if you know that you struggle with that, and also if you know that you might actually want to act on that goal in a shorter time period, those CDs, like I said, have penalties.

Maggie Germano: 02:32 So if you do decide you want to access that money sooner than planned, you’re going to have to pay those fees. I personally in this scenario would you use a high yield bank account, which I talked about more in depth in episode two you should choose a high yield savings account at a bank like ally, synchrony, American express, or Barclays, and put your money there. The interest rates have been hovering around 2% right now, which will earn you a whole lot more interest than if you put the money in a typical brick and bank. This means that you’ll earn between a hundred dollars and $240 per year. Whether you have $5,000 or $12,000 over the course of the two to five years. That amount isn’t necessarily life changing, but it’s also not nothing and it means that your money was growing for you while you set it aside until you needed it. Good luck and happy saving.

Maggie Germano: 03:21 thanks for tuning in to the money circle podcast this week. Make sure that you rate, review and subscribe so that you never miss an episode. It also helps to get the money, circle podcasts and other people’s ears. If you make sure to subscribe, if you’d like to get more connected with money, circle or with me. There are lots of ways you can do that. To join the free Facebook group, visit facebook.com/groups/moneycirclegroup. To stay informed of any upcoming events, subscribe to my weekly newsletter maggiegermano.com/subscribe. If you’d like to join the virtual money circle membership group, visit Maggiegermano.podia.com/inner-circle. To learn more about my financial coaching services, my speaking and workshop or offerings, or just to read my blog, visit Maggiegermano.com. You can also follow me on Instagram and Twitter @Maggie Germano. Thanks for tuning in.