If you have $10,000 you need to sock away for the near future, where's the best place to put it so you can maximize your returns?
In the latest Fed meeting in July, the FOMC did not decrease interest rates but two of the Fed governors dissented (the first time that has happened in several decades). And now the market has priced in a rate drop in September, with the CME Group FedWatch tool reporting an 85.7% chance of a cut of 25 basis points.
If you're a saver, now might be a good time to look at your options for short term savings given a rate cut is on the horizon.
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High Yield Savings Accounts
For maximum flexibility, take a look at high yield savings accounts. Interest rates on savings accounts are variable, so they can change at any time, but your money is FDIC insured and completely safe. If you wanted it today, you can get access to it without penalty.
The rates we're seeing now for these accounts is around 4.50%.
One nice benefit of these bank accounts is that you can also take advantage of bank bonuses too. Raisin is offering a bonus of up to $1,000 depending on how much you deposit into an account. For example, if you deposit $50,000 in cash, you'll get a $500 cash bonus on top of the interest you'd normally earn on the account.
Certificates of Deposit
If you can afford to lock up your money for a few months, you can improve your returns by turning to a certificate of deposit. These rates are fixed for the term but there are penalties of you need access to your money. The penalty is typically in the form of a few months of interest, depending on the length of the CD.
On 12-month CDs, you can expect to get a fixed rate of around 4.25%.
Alternatively, you can always turn to no penalty CDs. They offer slightly lower interest rates but you are able to withdraw your money at any time (after an initial lock in period of a few days).
U.S. Treasuries
A third option is to put your money in government debt, known as Treasury bills, notes, and bonds. Treasury bills have terms of a year or less, notes are 2-10 years, while bonds are 20 or 30 years. They are backed by the full faith and credit of the U.S. Government. I Bonds are also a good one to consider as it is inflation protected.
With Treasuries, you can buy them from TreasuryDirect or on a secondary market with your bank or brokerage. Personally, I think buying them on a secondary market through your brokerage is a bit more convenient but you should go with which ever method works best for you.
For Treasuries, you can look up the rates here. They're typically in the low 4% depending on the term but remember that the interest it not subject to state and local taxes. Depending on where you live, that can be significant.
Money Market Funds
Money market funds are mutual funds that invest in low risk, short term debt such as Treasury bills, municipal debt, and corporate bonds. The idea is that you want yield but you want as little risk as possible. It's a one stop shop where you pay a small expense ratio to not have to worry about picking specific notes.
We have most of our investments at Vanguard and we use the Vanguard Federal Money Market Fund (VMFXX) as our settlement fund. It offers a solid yield (4.23% as of 8/1/2025) at an expense ratio of just 0.11%. It holds 277 notes with an average maturity of 32 days – so very short term yet it provides a yield that is comparable to high yield savings accounts.
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