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Are you tired of earning almost nothing on your savings? As interest rates fall, it’s smart to look for better places to park cash—especially funds set aside for short-term goals, an emergency cushion, or upcoming big purchases. You still need liquidity, but you don’t have to accept the low returns of a standard savings account. Here are seven practical cash alternatives that balance safety, access, and higher yields.
Why keep some cash liquid
Keep enough money in liquid accounts for near-term goals—like a house down payment or a car purchase—and for unexpected expenses such as home or auto repairs and medical bills. Holding cash also prevents having to sell investments at a loss during market downturns. The goal: earn more than a basic savings account without locking your money away for too long.
1) High-yield cash accounts (including robo-advisor cash funds)
Several automated investment platforms and fintech firms offer high-yield cash accounts or “cash management” funds that pay better rates than typical bank accounts. They often partner with banks to access competitive yields and provide bank-level security. These accounts are easy to open, let you transfer money in and out, and usually don’t impose long lockups or high fees.
2) Money market mutual funds
Money market mutual funds (not to be confused with bank money market accounts) maintain a stable $1 net asset value and invest in short-term corporate and government debt. They offer high liquidity and relatively low risk. You can buy them through major brokerages and use them as a higher-yield place to hold uninvested cash.
3) Treasury Inflation-Protected Securities (TIPS)
TIPS are government bonds that adjust their principal for inflation. They don’t offer high returns in nominal terms, but they protect purchasing power: when inflation rises, the inflation-adjusted interest you receive increases as well. You can buy individual TIPS through TreasuryDirect or via brokerage accounts, and there are ETF options if you prefer a fund.
4) Series I Savings Bonds
I Bonds combine a fixed rate and a variable inflation-adjusted rate that resets every six months, protecting you against inflation. You can buy them directly at TreasuryDirect (minimum $100) up to $10,000 per person per year, plus an additional $5,000 if you use your federal tax refund. They’re an excellent choice for inflation protection, though the purchase limit is a constraint for larger savers.
5) Treasury bills (T-bills)
T-bills are short-term U.S. government securities with maturities from a few days up to 52 weeks. Backed by the U.S. government and generally offering competitive yields, they are a safe place to park cash. You can buy them via TreasuryDirect, through brokerages, or indirectly via T-bill ETFs. A common strategy during rising-rate periods is to ladder short maturities (e.g., 3- or 6-month bills) to refresh yields regularly.
6) Short-term bond funds and individual short-term bonds
Short-term corporate or government bonds and short-term bond funds typically yield more than bank savings accounts, though they carry principal risk—prices can fluctuate with interest rates. Buying individual bonds that mature in 1–3 years avoids price volatility if you hold to maturity, while short-term bond funds offer diversification but can rise or fall in value. Examples of short-term bond funds and ETFs can be found at major fund families.
7) Certificates of deposit (CDs)
CDs lock up your money for set terms—commonly from three months to five years—in return for higher interest rates. Longer terms generally pay more. If you withdraw early you may forfeit some interest, so laddering CDs (buying several with staggered maturities) can provide periodic access to cash while capturing higher rates on longer terms.
Key trade-offs and tips
– Liquidity vs. return: Higher yields often mean less liquidity or some price risk. Match the tool to your time horizon and need for access.
– Principal risk: Money market funds, Treasury bills, and I Bonds are generally stable, but bond funds and some cash alternatives can fluctuate in value. Holding individual bonds to maturity removes market-price risk.
– Laddering: Staggering maturities (T-bills or CDs) helps manage interest-rate risk and keeps cash becoming available regularly.
– Shop around: Compare yields across banks, brokerages, and cash management providers to find the best rate for the level of access and safety you need.
You don’t have to settle for your bank’s low savings rate. By choosing appropriate cash alternatives—money market funds, high-yield cash accounts, short-term Treasuries, I Bonds, TIPS, short-term bonds, or CDs—you can preserve capital while earning meaningfully higher returns for your emergency fund and short-term goals.
