Thanks to the Federal Reserve’s campaign of rate increases in 2022 and 2023, once-miserly yields on cash instruments have made a significant turnaround. Certificates of deposit, money market funds, and other cashlike assets are finally generating attractive yields for the first time in decades.
Of course, it’s a mistake to overdo cash holdings, especially with inflation still looming. Even with higher yields coming online, rising prices gobble up a healthy share of the purchasing power of your cash yields. But everyone needs an emergency cushion equal to three to six months’ worth of basic living expenses, at the low end. For retirees, I like the idea of maintaining a cushion of one to two years’ worth of portfolio withdrawals in liquid reserves; that way you don’t have to sweat losses in your stock and bond portfolios or risk having to sell them when they’re down.
Is your money just sitting there, slowly losing value while inflation creeps up? You’re not alone. In 2022, with inflation hitting levels we haven’t seen in decades, finding safe places to park your cash that actually keep pace with rising prices is more important than ever.
I’ve been researching this topic for weeks (ok, maybe just days, but who’s counting?) and I’m ready to share what I’ve found Whether you’re building an emergency fund or just looking for somewhere better than a traditional savings account paying 0.01% interest (seriously, what’s even the point?), I’ve got you covered.
Why This Matters Right Now
Inflation is hovering around 2.3% as of 2022. That might not sound like much, but it means every $1,000 you have sitting in a zero-interest account is effectively losing $23 in purchasing power each year. Yikes!
So let’s dive into where you can park your money without watching it silently disappear.
Quick Comparison: Cash Vehicle Options in 2022
Before we dive into the details, here’s a snapshot of what we’re looking at:
| Cash Vehicle | Current Rate Range | Typical Liquidity | Federal Protection |
|---|---|---|---|
| High-yield online savings | 4.30 – 4.66% APY | 1-2 business days | FDIC insured up to $250,000 |
| Money-market funds | 3.97 – 4.02% yield | Same-day in brokerage | SIPC covered up to $500,000 |
| Short-term CDs (6-12 months) | 3.75 – 4.49% APY | Locked until maturity | FDIC insured up to $250,000 |
| Treasury bills (26-week) | 4.09 – 4.31% yield | Sellable in secondary market | US government backed |
| Series I bonds | 3.98% composite rate | Must hold 1+ year | US government guaranteed |
Note Rates are current as of 2022 and subject to change
1. High-Yield Online Savings Accounts
Best for: Emergency funds or cash you might need right away
Online banks typically offer much better rates than traditional brick-and-mortar banks. While your regular bank might be paying a laughable 0.01% interest, online banks are competing hard for your business with rates over 4% in many cases.
Pros:
- Usually offer same-day or next-day withdrawals
- FDIC insured up to $250,000
- Rates often rise quickly after Federal Reserve hikes
Cons:
- Rates can fall without notice if market rates drop
- Interest is taxable as ordinary income
- Some banks limit transfers or delay larger withdrawals
I personally use an online savings account for my emergency fund. The peace of mind knowing I can access it quickly while still earning a decent rate makes it worth it to me.
2. Money Market Funds & Accounts
Best for: Brokerage sweep cash or money you might trade with soon
There’s a bit of confusion here because there are two types: bank money market accounts (FDIC-insured) and brokerage money market funds (covered by SIPC).
The brokerage version invests in short-term government or corporate paper. They’re super liquid and generally track the federal funds rate.
Pros:
- Yields generally follow the federal funds rate
- Same-day settlement within your brokerage account
- Government MMFs may reduce state income tax exposure
Cons:
- MMFs aren’t FDIC-insured (SIPC only protects if broker fails)
- Rules allow temporary liquidity fees during market stress
- Yields can lag when rates rise quickly
3. Short-Term CDs & CD Ladders
Best for: Cash you won’t need for 3-12 months
Certificates of Deposit give you a locked-in rate for a set time period. The cool trick here is building a “ladder” – like buying 3-month, 6-month and 9-month CDs so you have money maturing at regular intervals.
Pros:
- Guaranteed rate for the term, even if rates drop later
- Laddering gives periodic liquidity while boosting yield
- FDIC-insured within the $250,000 cap
Cons:
- Early withdrawal penalties can eat your interest
- Locked rate underperforms if rates rise rapidly
- Limited liquidity compared to savings/MMFs
My cousin tried this approach last year and swears by it. He’s always been the type to squeeze every penny, tho.
4. Treasury Bills & I Bonds
Best for: Savers looking for federal backing and tax advantages
T-bills are short-term government securities, while Series I Bonds combine a fixed rate with an inflation adjustment. The cool thing? Interest is exempt from state and local taxes!
Pros:
- Backed by the full faith and credit of the US government
- State tax exemption boosts after-tax yield
- I Bonds adjust for CPI every 6 months (inflation hedge!)
Cons:
- I Bonds lock your money for 12 months minimum
- Annual I Bond purchase limit of $10,000 per person
- T-bill interest is taxable when the bill matures
We started buying I Bonds this year after our financial advisor recommended them. The 12-month lock is annoying, but the inflation protection makes a lot of sense right now.
5. Cash Management & Rewards Checking
Best for: Everyday spending money with potential returns
Many brokerages and fintech platforms offer accounts that sweep idle cash into partner banks, sometimes with debit card rewards or ATM rebates.
Pros:
- One login for spending, bills, and investing
- Sweep programs can multiply FDIC coverage
- Some accounts offer bonus rates or cash-back rewards
Cons:
- May require qualifying activities to get the best rates
- Transfers from partner banks can take 1-2 days
- FDIC coverage depends on program banks (monitor changes)
6. Alternative Assets
If you’re feeling a bit more adventurous or worried about the traditional financial system, there are some non-traditional places to park money.
Real Estate
Property can generate income through rentals and potentially appreciate over time. REITs (Real Estate Investment Trusts) offer an easier way in.
But remember, real estate can be risky! The housing bubble that led to the Great Recession is an extreme example of how quickly things can go south.
Precious Metals
Gold and silver have historically held value during financial crises. They typically have low correlation with stocks and bonds, so when markets tank, metals might hold steady or even rise.
The downside? No income generation, storage costs, and sometimes volatile prices.
7. Diversified Options for the Ultra-Cautious
Some people like to spread their money across multiple vehicles:
Federal Bonds
For the risk-averse, U.S. government bonds are considered nearly risk-free. The downside is relatively low returns compared to other debt instruments.
Cash Reserves
Some folks keep actual cash at home in a safe or hidden away. While this ensures immediate access, it earns nothing and actually loses value to inflation over time.
Not to mention the risk of theft, fire, or forgetting where you hid it (don’t laugh, my grandpa did this).
Choosing the Right Option for YOUR Needs
Picking where to park your cash comes down to:
- When you’ll need it – Next week? Six months? A year?
- How much access you need – Immediate or can you wait?
- Your tolerance for fees or penalties – Early withdrawal charges, etc.
- Tax considerations – Some options are more tax-efficient
For most people, a mix of these options makes the most sense. Maybe keep your emergency fund in a high-yield savings account, medium-term savings in a CD ladder, and some in I Bonds as an inflation hedge.
Quick Moves to Stay Ahead
Here are some simple steps to keep your cash competitive with inflation:
- ✅ Set up rate alerts from financial websites
- ✅ Ladder short-term Treasuries or CDs
- ✅ Automate transfers from checking to higher-yield accounts
- ✅ Keep balances within FDIC/SIPC limits for protection
Final Thoughts
Parking your cash isn’t just about safety anymore – it’s about making sure inflation doesn’t silently eat away at your hard-earned money.
The good news? You’ve got options in 2022 that can actually keep pace with or beat inflation while keeping your principal safe. The key is matching the right option to your specific timeline and goals.
Remember, rates change frequently, so what’s best today might not be best tomorrow. Keep an eye on things and don’t be afraid to move your money when better opportunities arise.
What’s your favorite place to park cash in 2022? I’d love to hear what’s working for you in the comments!
Surveying the Field of Short-Term Investments
Certificates of Deposit: CDs will typically offer the most compelling yields of all cash instruments, and they’re also FDIC-insured. Five-year CDs on Bankrate.com were recently yielding about 4.25%, and three-year CDs were paying out 4.10% to 4.20% per year.
Yet there are a couple of caveats. One is that minimum deposits for the highest-yielding CDs might be $25,000 or even higher. More significantly, there’s a trade-off on the liquidity front: You’ll usually pay a penalty if you need to crack into your holdings before the maturity date. The longer the term of the CD, the bigger the penalty for cashing out early. For example, it’s common for five-year CDs to charge a penalty equal to six to 12 months’ worth of interest on early withdrawals, whereas one-year CDs might charge three to six months’ worth of interest. Banks offer so-called “no-penalty CDs,” but yields are substantially lower because of that optionality.
Retirees or other individuals with ongoing cash flow needs can employ a laddered CD strategy, purchasing CDs of varying maturities; that way something is always maturing to meet cash flow needs. For emergency reserves, however, CDs will be less appropriate because withdrawals are apt to be unplanned and could trigger early-withdrawal penalties.
Online Savings Accounts: If you want daily liquidity, a decent yield, and FDIC protection, your best bet will tend to be a high-yield savings account through an online bank or a savings account through a credit union. The former offers FDIC protection, up to the limits, whereas credit union accounts are insured by another entity, the National Credit Union Administration. A recent scan of savings accounts on Bankrate.com uncovered yields of over 4%, and many of these accounts come with check-writing privileges. Minimum investment amounts also tend to be lower than is the case for CDs, but there may be requirements to maintain a minimum balance.
Money Market Mutual Funds: Money market mutual funds, offered by major investment providers like Fidelity, Schwab, and Vanguard, also offer daily liquidity and the convenience of having those funds live side by side with your long-term investments. But money market fund yields are still generally below those of online savings accounts today. Additionally, money market mutual funds aren’t FDIC-insured, though in practice most funds have done an excellent job of maintaining stable net asset values. (What’s confusing is that money market accounts are a type of savings account offered by banks; these accounts typically are FDIC-insured, though yields won’t usually be anything to write home about.)
Don’t confuse money market mutual funds with brokerage sweep accounts, though both are offered by investment providers. Interest rates on brokerage sweep accounts, which hold investors’ cash that hasn’t yet been invested, have ticked up a bit recently but are still well below other cash options, including money market mutual funds. For example, money market funds at Schwab were currently yielding more than 4.00%, whereas the firm’s sweep account was paying out 0.05%. That argues against using a sweep account as the main receptacle for your cash.
Stable-Value Funds: Stable-value funds are another example of an investment that offers an often-decent yield in exchange for not checking the liquidity and guarantee boxes. Stable-value funds are only accessible inside of company retirement plans. They invest in bonds, so they’re not FDIC-insured; to protect investors’ principal, they employ insurance wrappers to help maintain a stable net asset value. Just bear in mind that stable-value funds carry drawbacks. Because you can only own such a fund within a 401(k), you’ll pay taxes and penalties to withdraw your money before retirement unless you meet certain criteria. In other words, don’t think of a stable-value fund as an emergency fund unless you’re already retired or close to it. Second, even though stable-value funds buy insurance wrappers to help protect investors’ principal, the assets aren’t guaranteed or eligible for FDIC protections.
Honorable Mention: I Bonds: In contrast with the preceding investment types, the income from which will be gobbled up by inflation, I bonds are the only safe investment vehicles that will guarantee to make investors whole with respect to inflation. I bonds are Treasury bonds that pay a fixed rate of interest as well as another layer of interest that varies with the current inflation rate, as measured by the Consumer Price Index. The inflation adjustment is made twice a year. I bonds issued Nov. 1, 2024 through April 30, 2025, have a 3.11% yield that comprises a fixed rate of 1.20% and an inflation adjustment of 1.90%.
As attractive as that is, however, it comes with a few asterisks. The first is that I bonds fail the liquidity test. If you redeem an I bond within five years of buying it, you’ll forfeit three months’ worth of interest. Purchase constraints are another drawback for large investors. New I-bond purchases are currently restricted to $10,000 per year per Social Security number. Investors used to be able to purchase additional I bonds with their tax refunds, but the Treasury Department discontinued that option, starting in 2025.
Editor’s Note: A version of this article was published on May 24, 2023.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
The Best Short-Term Investments: What Matters Most?
As you sift among the various options for your short-term investments, keep three key items on your dashboard: yield, guarantees, and liquidity, and what matters the most given your situation. The short-term investments that promise the highest yields often come with at least some level of risk and/or constraints on your daily access to funds. It may be that you’re just looking for the highest safe yield and don’t care that much about liquidity. Or maybe having ready access to your funds—because you’re using the money as your emergency fund—is the name of the game.
Yield: While it’s tempting to park your short-term investments in whatever is offering the highest yield right now, be sure to read the fine print. The accounts with the highest yields typically require you to maintain a minimum balance. Attractive “teaser” rates may also apply to the first few months you hold the account but drop after that. Additionally, that very high yield may only apply to balances under a certain level, often as low as $15,000, and you’ll earn less if you hold more than that.
Liquidity: Liquidity constraints are another differentiator among cash holdings: If you’re willing to tie up your money with a financial institution for a predetermined time period—as is the case with certificates of deposit—you’ll usually be able to earn a higher return than if you’d like to have ready access to your cash. Banks will pay you more for the certainty of knowing that your funds will be there for a specific amount of time than they will if you could pull your cash at any time.
Guarantees: Also take a moment to think through whether you value an ironclad guarantee or are willing to go without in exchange for a potentially higher yield. Some cash instruments are fully FDIC-insured (up to the limits), while others are not. FDIC-insured accounts provide the assurance that you’ll be made whole if your account has a loss; FDIC insurance covers up to $250,000 per depositor per institution. On the short list of FDIC-insured investments are checking and savings accounts, CDs, money market accounts (not to be confused with money market mutual funds), and online savings accounts. Money market mutual funds aren’t FDIC-insured, though money funds that invest in Treasury bonds are buying securities that are backed by the full faith and credit of the US government.
Where Should I Park My Savings For A House?
FAQ
Where’s the safest place to put your money right now?
FDIC-Insured Savings Accounts
FDIC-insured savings accounts represent one of the safest places to keep your money. When you deposit funds in these accounts, the Federal Deposit Insurance Corporation guarantees your deposits up to $250,000 per depositor, per bank, per ownership category.
Where can I put my money where I can’t touch it?
Certificates of deposit. With a certificate of deposit (CD) your money is stuck for a set time of your choosing — usually anywhere from one month to five years — while it earns a fixed interest rate. It’s more restricting than a traditional savings account because you can’t access your money until the term is finished.
Where is the safest place to put $100,000?
Stocks, bonds, and mutual funds can diversify your portfolio but come with varying levels of risk and taxation. For low-risk investors, certificates of deposit (CDs) and high-yield savings accounts offer safer return options.
Where is the safest place to park your money?
While you’re not using it, though, your account needs a safe place to grow. Stashed in a high-yield savings account, certificate of deposit (CD), money market account or even a Roth IRA, your emergency fund can continue growing until the day you need it.