10 Best Short-Term Investments And Strategies Right Now

Short-term investing has a different job than long-term investing. It isn’t there to compound for 30 years. It’s there to be worth what you put in, plus a little, on the exact day you need it.

That distinction matters more in 2026 than it did two years ago. Cash yields peaked in 2023-2024, and today, the top online savings accounts pay around 4.15% APY. Treasury bills yield somewhere in the 3.6% to 3.9% range depending on the term.

You can still earn a real return above the 3.5% annual inflation rate — but the margin is thin, and the gap between a good account and a lazy one is wider than the gap between asset classes. Someone with $25,000 at a big bank paying 0.01% and someone with $25,000 at an online bank are having completely different years.

Here’s where to put money you’ll need within the next few years, ranked roughly by how most people should use them.

What Counts As A Short-Term Investment?

A short-term investment is money you expect to spend within five years. The defining constraint isn’t the return — it’s that you can’t afford a loss on a specific date.

That rules out the stock market. A diversified index fund is the right home for a 20-year goal and the wrong home for a down payment you’re making in 18 months. Stocks have dropped 30%+ in a year multiple times in recent memory, and your closing date doesn’t care. If your timeline is longer than five years, you’re in long-term investing territory and this list is the wrong tool.

The other half of the question is how much belongs here at all. For most people that’s three to six months of expenses as a cash reserve, plus anything already earmarked for a purchase with a date attached. Money beyond that is being wasted on safety it doesn’t need.

Match the product to the horizon:

1. High-Yield Savings Accounts

The default answer for most short-term money, and the one people leave the most money on the table by ignoring.

Online banks pay in the low 4% range right now. The national average savings rate is 0.63% APY. That’s roughly a 6x difference for money sitting in the exact same FDIC-insured wrapper. On a $20,000 emergency fund, the spread is about $700 a year — and because savings interest compounds daily at most online banks, the gap widens the longer you leave it alone.

What to look for:

• No monthly fee and no minimum balance to earn the advertised rate
• FDIC insurance (or NCUA for credit unions) — $250,000 per depositor, per bank, per ownership category
• No cap on the balance that earns the top rate — some banks pay a headline APY only on the first $5,000 or $10,000
• Fast ACH transfers back to your checking account

Watch for teaser rates that drop after three months, and “up to” APYs that require direct deposit, a debit card minimum, or a linked checking account. 

If your balance runs past $250,000, you’re not out of luck. There are several ways to insure deposits above the FDIC limit, including titling accounts differently, spreading money across banks through a platform like Raisin, or banking somewhere covered by the Depositors Insurance Fund.

2. Money Market Accounts

A bank money market account is a savings account with check-writing or debit access bolted on. Same FDIC coverage, same liquidity, sometimes a slightly better rate — often at the cost of a higher minimum balance.

The practical case for one: you want your emergency fund earning a competitive yield but you also want to write a check against it without a two-day transfer. If you don’t need that, a high-yield savings account usually pays the same or better with a lower minimum. A high-yield checking account can also cover the same ground if you’re willing to meet monthly debit card requirements.

Don’t confuse a bank money market account (FDIC insured, fixed APY) with a money market fund (a mutual fund, not insured). They’re different products with similar names — see the next section. Business owners have a separate set of options worth comparing on their own terms.

Read more:
Best Money Market Accounts

3. Certificates Of Deposit (CDs)

A CD trades liquidity for a locked rate. You commit money for a set term — three months to five years — and the bank guarantees the APY for that whole period, FDIC insured up to $250,000.

Top 1-year CDs are paying around 4.25% APY. The national average for the same term is 2.02%, so shopping matters here even more than with savings accounts. If you’re placing $100,000 or more, jumbo CDs sometimes carry a small premium — though often not enough to justify the concentration.

Three variations worth knowing:

No-penalty CDs. Withdraw the full balance any time after the first week without forfeiting interest. You give up maybe 0.20% to 0.40% versus a standard CD in exchange for an exit. Reasonable when you think rates are falling but you’re not certain about your timeline.

Brokered CDs. Bought through a brokerage account rather than directly from a bank. They often pay more, you can hold CDs from many banks in one account (multiplying FDIC coverage), and you can sell early on the secondary market. The catch: selling early means taking whatever price the market offers, which can be less than you paid.

CD ladders. Split the money across 1-, 2-, 3-, 4-, and 5-year CDs. One matures every year, which you either spend or roll into a new 5-year CD. You capture longer-term rates without locking everything up.

Check the early withdrawal penalty before you sign. They range from 30 days of interest to a full year’s worth. On a 1-year CD, a 6-month interest penalty wipes out half your return — which is why comparing current CD rates means comparing penalty terms, not just APYs.

Read more:
Best Bank CD Rates | Best 12-Month CD Rates

4. Short-Term And Ultra-Short Bond Funds

Bond funds holding debt that matures in one to three years. They pay more than cash and bounce around less than intermediate or long-term bond funds, because short maturities are less sensitive to rate changes.

The tradeoff is real: these can lose money. A short-term bond fund might drop 1% to 3% in a bad stretch. That’s survivable for money you need in three years and unacceptable for money you need in three months.

The main categories:

• Government — Treasuries and agency debt. Lowest risk, lowest yield.
• Corporate — investment-grade company debt. More yield, some credit risk.
• Municipal — state and local government debt. Interest is generally federally tax-free, and often state tax-free in your home state. Worth running the after-tax math if you’re in the 32% bracket or higher.

Watch the expense ratio. On a fund yielding under 4%, a 0.60% expense ratio eats 15% of your return. Index options exist under 0.10%, and the ETF versions are usually the cheapest way in. Skip international bond funds for short-term money — currency risk defeats the purpose.

Read more:
How To Build A Diversified Bond Portfolio | Best Bond Alternatives

5. Treasury Inflation Protected Securities (TIPS)

TIPS are Treasury bonds whose principal adjusts with the Consumer Price Index. When inflation runs, your principal rises and your interest payments rise with it. When inflation falls, both shrink — though you’re guaranteed at least your original principal at maturity if you hold the individual bond to term.

With headline inflation at 3.5% and core at 2.6%, TIPS are less of a bargain than they were in 2022, but they still do something no other short-term product does: they protect the purchasing power of the money, not just the dollar amount. That matters more for a five-year goal than a five-month one, since inflation compounds against you the same way returns compound for you.

Short-duration TIPS funds are the practical route for most people — they hold TIPS maturing within five years, which limits the interest rate swings you get with longer TIPS. Buying individual TIPS at auction through TreasuryDirect or a broker also works if you can match the maturity to your goal date.

One tax quirk: the inflation adjustment to principal is taxable in the year it happens, even though you don’t receive the cash until maturity. Hold TIPS in a tax-advantaged account when you can.

6. Treasury Bills

T-bills are short-term debt issued by the U.S. Treasury, sold in terms of 4, 8, 13, 17, 26, and 52 weeks. You buy at a discount and receive face value at maturity; the difference is your interest.

Two reasons T-bills belong in this conversation even when a savings account pays more on paper.

State tax exemption. T-bill interest is exempt from state and local income tax. If you live in California, New York, or another high-tax state, a 3.89% T-bill can beat a 4.15% savings account after tax. Run it against your actual bracket before deciding — in Texas or Florida, the exemption is worth nothing and the savings account wins outright.

Rate lock. A savings account APY can drop the day the Fed cuts. A 52-week T-bill locks your yield for a year with no early withdrawal penalty. You can sell it on the secondary market if you need the cash, at whatever price it fetches that day.

You can buy T-bills directly at TreasuryDirect.gov in $100 increments with no fee, or through most brokerages. Going through a broker is easier to sell early and easier to hold alongside everything else; TreasuryDirect has a clunky interface but supports automatic reinvestment. Most of the major brokerages now offer Treasury auction participation at no commission.

Building a ladder: Buy equal amounts of 4-, 8-, 13-, and 17-week bills. As each matures, roll it into a new one. You get access to a slice of your money every few weeks while the rest stays invested at longer, usually higher, yields. The same mechanics work with CDs on a longer timeline.

Read more:
Treasury Bills: A Smart Bet For Conservative Investors

7. Selling Covered Calls

The one strategy on this list that requires you to already own something else.

If you hold at least 100 shares of a stock or ETF, you can sell a call option against it and collect a premium up front. If the stock stays below the strike price, you keep the premium and the shares. If it rises above, your shares get called away at the strike — you keep the premium but miss the upside beyond it.

This generates income from an existing position in a flat or slowly declining market. It is not a place to park cash, and it does nothing to protect you if the underlying stock drops. The premium cushions a small decline; it doesn’t prevent a large one. If you haven’t traded options before, start with the basics rather than learning on real money.

Realistic use case: you’re holding a large position you’d be willing to sell at a specific price anyway, and you want to get paid to wait. Anything beyond that gets complicated fast, and the tax treatment on assigned shares can surprise you. You’ll also need a broker with options approval — the platforms differ a lot on pricing and tools. Most people reading this should skip it.

Related: Best Options Trading Platforms

8. Series I Savings Bonds

I bonds pay a composite rate that resets every six months — a fixed rate that stays with the bond for life, plus an inflation component tied to CPI. The current composite rate is 4.26% through October 2026, on a 0.9% fixed rate.

The rules shape how they fit:

• $10,000 per person per year through TreasuryDirect
• You can’t touch the money for 12 months, period
• Cash out before five years and you forfeit the last three months of interest — the same math as a 90-day CD penalty
• Interest is exempt from state and local tax, and federal tax is deferred until you redeem

That 0.9% fixed rate is the number to watch. It’s the real return you’re locking in above inflation for the full 30-year life of the bond. It’s down from the 1.30% peak in 2023-24, but it’s still a positive real yield you keep permanently — something a savings account can never promise.

The 12-month lockup means I bonds are not an emergency fund on day one. They become one in year two: buy this year’s allotment, keep a separate cash cushion, and by next year the I bonds are liquid backup. That rolling strategy is the best use of the annual limit for most households. If you’ve got paper bonds from a relative sitting in a drawer, that’s a separate errand worth running.

Read more:
What Are I Bonds? | How You Can Use I Bonds As An Emergency Fund

8. Pay Off Student Loan Debt

Do you want a guaranteed return on your money over the short run? Well, the best guaranteed return you can get is paying off your student loan debt. Typical student loan debt interest rates vary from 4-8%, with many Federal loans at 6.8%. If you simply pay off your debt, you can see an instant return on your money of 6.8% or more, depending on your interest rate.

Maybe you can’t afford to pay it all off right now. Well, you could still look at refinancing your student loan debt to get a lower interest rate and save some money.

We recommend Credible to refinance your student loan debt. You can get up to a $1,000 bonus when you refinance by using our special link: Credible >>

9. Pay Off Credit Card Debt

Similar to getting out of student loan debt, if you pay off your credit card debt you can see an instant return on your money. This is a great way to use some cash to help yourself in the short term.

There are very few investments that can equal the return of paying off credit card debt. With the average interest rate on credit card debt over 12%, you’ll be lucky to match that in the stock market once in your life. So, if you have the cash to spare, pay down your credit card debt as quickly as possible.

If you’re struggling to figure out a way out of credit card debt, we recommend first deciding on an approach, and then using the right tool to get out of debt.

For the approach, you can choose between the debt snowball and debt avalanche. Once you have a method, you can look at tools.

First, you need to get financially organized. Use a free tool like Empower to get started. You can link all your accounts and see where you stand financially.

Next, consider either:

1. Balance Transfer: If you can qualify for a balance transfer credit card, you have the potential to save money. Many cards offer a promotional 0% balance transfer for a set period of time, so this can save you interest on your credit card debt while you work to pay it off.
2. Personal Loan: This may sound counter-intuitive, but most personal loans are actually used to consolidate and manage credit card debt. By getting a new personal loan at a low rate, you can use that money to pay off all your other cards. Now you have just one payment to make. Compare personal loans at Credible here.

Mistakes That Cost People Money

Leaving cash in a big-bank savings account. The national average is 0.63%. Moving to an online bank takes 20 minutes and is the highest hourly-rate work most people will do this year.

Ignoring the brokerage sweep. Uninvested cash at a broker often defaults to a low-yield bank sweep instead of a money market fund. Check yours today.

Reaching for yield with money you need soon. Every year someone puts a house down payment into an S&P 500 fund because “it’s only 18 months.” Sometimes it works. When it doesn’t, it costs them the house.

Chasing a 0.10% APY difference. On $10,000, that’s $10 a year. Once you’re in the top tier, stop optimizing and go put the effort somewhere it compounds.

Buying a long CD to squeeze out a few basis points. If a 5-year CD pays 4.05% and a 1-year pays 4.25%, the longer term is paying you less to give up more flexibility. Check the curve before you lock.

Holding too much cash. Once the emergency fund is funded and near-term goals are covered, additional cash is a drag. That money belongs in tax-advantaged accounts doing real work.

Frequently Asked Questions

What’s the safest place to put money for one year?

An FDIC-insured savings account or CD, or a Treasury bill. All three carry essentially no risk of principal loss. Compare the after-tax yield rather than the headline rate.