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The best places to stash your cash for short, medium- and long-term goals

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If you’re working toward a savings goal, you have a lot of options for where you can put away your cash. Savings accounts, certificates of deposit, money market accounts, cash management accounts and investment accounts are all possibilities.

So which should you choose? That depends on how far away your goal is, how much you hope to earn on your cash and how often you want to access it. Here’s how to decide which savings or investment vehicle is best for you.

Factors to consider when stashing your savings

The features of different accounts can help you select the right savings vehicle. When deciding where to stash your savings, consider:

Access to withdrawals. Some accounts — such as CDs and retirement accounts — charge a penalty fee if the account owner withdraws money before a certain time. If you think you’re going to need your liquid cash in the near future, that will affect your choice of account.

Interest rate. Some types of accounts offer higher interest rates or potential investment income than others. Both factors can also vary depending on the bank or brokerage.

How far away your goal is. Think about how much you’ll need to save to achieve your financial goal and how long it will take you to get there. If it’s longer than several years, shift your mind-set from saving to investing.

“Anything past four or five years is no longer savings,” said Todd Christensen, education manager for the nonprofit debt relief service MoneyFit, in an email. “You should see anything longer than four or five years instead as an opportunity to invest and build your net worth.”

Read: How saving $1,000 per year can make you a millionaire

With these points in mind, check out these savings options.

Where to put short-term savings

Short-term saving goals are those that will likely take less than a year to save for, like for a vacation, small emergency fund or a home improvement project. Good homes for that money include:

High-yield savings account. These accounts, typically offered by online banks, tend to offer much higher interest rates than savings accounts at traditional brick-and-mortar banks. Though the return is lower than with savings vehicles such as CDs or investment accounts, you’re able to quickly access your cash as needed.

Money market account. An MMA is a savings account that has some checking features, such as offering paper checks or a debit card. Interest rates for competitive MMAs tend to be similar to those of high-yield savings accounts.

Cash management account. CMAs — offered by brokerages rather than banks — typically have decent interest rates and some checking features, such as a debit card and ATM access.

Where to store medium-term savings

Say you want to save for something that may take a year or more, like an emergency fund with three to six months of expenses, a large wedding or a down payment on a house. An account that keeps your money safe and separate and earns a little interest is the way to go. The interest rates on these products usually don’t surpass inflation, so they won’t be optimal for building wealth.

“Instead, use these savings vehicles to keep your money safe from your impulses,” said Christensen.

High-yield savings account. Like short-term savings goals, medium-term goals are also a good match for a high-yield savings account, since they are liquid.

CDs. If you know exactly when you’ll want to use your savings — say, to purchase a house two years from now — consider putting the funds into a CD that matures just ahead of that date, allowing you to earn a set amount of interest toward your financial goal. Keep in mind that most CDs charge a penalty if you withdraw your cash before the end of the CD’s term. If that’s a concern, you can also consider a no-penalty CD, offered at some banks.

MMAs and CMAs. Money market accounts and cash management accounts can be solid options here too, due to their easy access, decent interest rates and useful checking features.

Where to keep cash for long-term financial goals

Maybe your goal is to save for or invest in something that will take a decade (or several), like retirement or your child’s college fund; here are good options.

Investment account. Over a long enough period, invested cash tends to earn the highest rate of return compared with other savings vehicles. If you’re saving for retirement, an account like a 401(k) or an individual retirement account (IRA) will be the best option for your savings. However, retirement accounts carry early withdrawal penalties until investors are at least 59½ years old. Another alternative: You can invest in a taxable investment account, which doesn’t have penalties for early withdrawal, but you will have to pay annual taxes on any capital gains.

See: Do these simple things to turn your retirement savings into big money

A good guideline is to keep cash invested for at least five years, to weather potential stock market volatility; being able to invest for the long term can help offset such fluctuations.

529 plan. 529 savings plans are tax-advantaged investment accounts that allow parents to set aside money for kids’ college tuition and earn compounding returns. If you want to save specifically for the costs of education, 529s are worth considering.

Whatever your financial goals, you have solid options for where to stash your money and, ideally, see it grow.

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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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These money and investing tips can help you make a place for crypto in your portfolio

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you a better understanding of bitcoin and other cyrptocurrency, and help you figure out if digital currency has a place in your portfolio alongside stocks, bonds and other traditional assets.

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