Short Term Savings Basics

After you've decided to get it together and get your money in order, you'll have all of these monies sitting around — so where should you put them? Do they even make giant bags with dollar signs on them anymore? There are many schools of thought on this, and rightly so. Personally, I like to look at my desired outcome when considering a first step. If you're baking a cake you need to set the oven to preheat before you crack the eggs, you feel me?

credit: Twenty20

0-2 years

So you've got your checking account in the black and you've built up a mini-emergency fund. Where should you keep it? Attached to your checking account, but separate, is a great place. The interest rates are non-existent and over time you'll actually lose money based on inflation vs. interest, but! It's important to have an immediately accessible safety net to keep life from upsetting your apple cart. New tires, broken phones, a huge heating bill — these are all things that a mini-emergency fund can cover.

If you're working on building up your emergency fund (3-6 months of expenses) you need to know where to stash it. Somewhere easy to get to...but not too easy. Savings accounts with a different bank or a prepaid debit card that you keep at home are both good choices. I keep mine in an online savings account that has an okay interest rate and can transfer into my main checking account in two days.

Specific savings goals like college funds, weddings, vacations, etc. need special treatment. Think about when you'll want the money and go from there.

2-5 years

It's easier than ever to compare rates and match one with your savings goal. Sites like

monitor CD rates and make it easy to choose a bank. Find one that works for your time frame and like Ron Popiel said, set it and forget it!

There's more
credit: Wager Daily

I bonds are another good choice as they adjust with inflation, instead of against like so many low-interest savings accounts.

5+ years

This is where things get tricky. You can either have time or money, but you can't have both...unless you're willing to take on some risk. Index funds are traditionally low-risk and high-reward, but they take time. High-risk and low-reward options include buying a bunch of Beanie Babies and crossing your fingers (not recommended).

Investing in an 80/20 mix of stocks and bonds has historically shown an almost 10% increase in investments over a 15 year period. However, that is absolutely best left to professionals. If you are reading this site, chances are you are not a professional. Find one who doesn't work on commission and be totally honest about your goals.

If you want to go beyond living paycheck to paycheck and build real wealth, these are the things you need to think about. So boring, but so important.