Best Places To Put Your Savings (Short/Medium/Long-Term)

While a savings account at a local bank is the most convenient place to save money, it’s probably not the best choice. There are many options to consider based on your savings goals and time horizons. Find out the best places to put your savings in this post!

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An email subscriber recently asked me where the best place to put savings is. It sounds like an easy enough question, but in order to give her the right answer, I had to respond to her question with a few of my own.

Do you have money set aside for a rainy day?

Are you saving money that you’ll need to use in the near-term (e.g. for a car or wedding)?

When are you planning to buy a house (or your next house)?

Where You Should Put Your Money

Two things we talk about on this site are saving and investing.

When you’re trying to figure out where to put your hard-earned money, first you need to figure out what you’re saving for and how soon you plan on using it.

(Savings Timeline)

Let’s break this down.

Money You Need Now (Less Than 1 Year)

Money You Need Now table
(Money You Need Now)

Money you need now or money you might need soon could be for things like an emergency fund (a rainy day fund for unexpected expenses), vacations you’re planning to go on soon, or a big purchase that’s coming up a few months from now.

Money for these near-term purposes shouldn’t be placed in any investments that have a chance of loss. It has to be super stable. However, that doesn’t mean that the savings account at your local bank is the best place for it. With interest rates at an all-time low, you’ll hardly make anything.

For example, a leading U.S. financial institution, Bank of America, is offering a meager 0.01% APY in interest!

Bank of America savings interest rate as of December 13, 2020
(Image from Bank of America)

Let’s say you put $25,000 in that savings account for one year. You’d earn a pitiful $2.50 in interest over those 12 months:

1-year return on $25,000 at 0.01% APY
(Image from

The Money Ninja is all about maximizing your finances. I wouldn’t leave my money in an account that only gives me a couple of dollars a year and you shouldn’t either.

There are number of digital banks that will give up to 100x more interest. Here’s a list of a few of them:

UFB Direct5.25% APY$26,312.50
CIT Bank4.65% APY$26,162.50
American First Credit Union5.24% APY$26,310.00
1Annual percentage yield (APY) is accurate as of 7/1/2024 and subject to change at the Bank’s discretion.

Clearly, all of these options give you a much higher return than you would get at traditional banks. Here’s the calculator I used to see how much interest is earned for a $25,000 principal balance.

Most of these banks offer sign-up bonuses too, so you’ll make even more.

Money You Will Need Soon (1 to 5 Years)

Money You Need Soon table
(Money You In 1-5 Years)

You’ve mastered being a white belt ninja (a.k.a. personal finance 101) – that emergency fund has enough money in it and your money for short-term goals is in a savings account with a competitive interest rate.

Now you’re looking to save for major life events that could happen in the next one to five years. That could entail big ticket items like buying a car or house, saving for a wedding, having a couple of kids, etc.

The 1% interest rate for near-term expenses is fine, but you’re questioning whether you should place your longer term savings in the same accounts. You know from Economics class that annual inflation is expected to be around 2%. What that means, of course, is that your money will eventually lose value if you put most of it in a savings account.

When you’re earning 1%, but things in life go up 2% every year, it’s going to be hard to catch up.

So when saving for expenses between one to five years, you need to get it out of the bank and into investments like stocks and bonds where your cash can grow faster. The downside of this is exposure to risk. If you don’t know what you’re doing, you could lose a lot of money.

Because of the risk and intimidation factor of not knowing where to start, most people do nothing. But you’re a smart ninja and what you’ll do instead is invest; either by yourself or with a little help:

Invest By Yourself

Open up a brokerage account and invest in low-fee index funds or exchange-traded funds (ETFs).

When you’re starting out, you don’t want to make a mistake of putting all your money into one stock. What if something negative happens to that company and you lose all your money? Let’s not think about that doomsday scenario!

Index funds and ETFs hold a collection of stocks – sometimes thousands. Hypothetically, if one or two companies go kaput, you’ll still be okay because the rest of the companies inside these funds are still chugging along. Diversification removes a big portion of risks.

Webull is a great brokerage account with an awesome mobile app. I’d recommend opening an account with Webull (you’ll also get free stocks for signing up and depositing any amount of money).

Webull 4 free stocks sign up offer
(Screenshot of Webull app)

Webull offers a ton of commission-free ETFs to buy. Examples include:

  • Vanguard Value ETF (symbol: VTV) = tracks the MSCI US Prime Value Market Index, which contains 154 large and medium-sized US companies
  • Vanguard Total Bond Market ETF (symbol: BND) = tracks the Barclays Capital U.S. Aggregate Bond Index, which measures the performance of nearly the entire US investment-grade market

Invest With Help

If that seems like it involves too many decisions, consider M1 Finance. M1 Finance is a site that lets you invest in stocks and bonds in two simple steps.

  1. Deposit money
  2. Select the percentage of stocks and bonds you want (M1 Finance will invest it for you based on your selection)
Betterment stocks and bonds donut GIF
(Image from Betterment)

Stocks are more risky than bonds, so choose your percentages carefully.

Ninja Hint: For investment periods between one and five years, choose 50% for bonds or more.

Buy Savings Bonds (Series I)

Another option that’s worth considering is buying savings bonds from the U.S. Treasury – specifically I Bonds. As of July 2024, I Bonds earn a respectable 4.28% in interest.

These are fully backed by the U.S. government and is as safe as they came. The interest offered is based on the inflation rate and is adjusted semi-annually. You can buy up to $10,000 per person, per calendar year.

Read my post on I Bonds for more information on how to buy them and what to expect.

Money You Will Need Later (More Than 5 Years)

Money You Need Later table
(Money You In 5+ Years)

If you’re here, consider yourself a black belt ninja guru!

You have your emergency savings and your medium-term funds in order and you’re turning your eye towards the super long-term.


I know, I know, retirement could be 30 or 40 years away for some readers. But that’s a good thing! Time is on your side and it’s never too early to plan ahead for your golden years.

This is when you need to be really aggressive in your investments. You should be willing to accept higher risks for bigger returns. Since your years away from using this money, you can weather the downturns in the stock market.

Historically, stocks average a 10% return annually, far exceeding the 1% you’d get in a savings account – compounded over many years, this makes a huge difference in how much money you’ll have when you retire.

Even if you put nothing else besides the $25,000 used in the previous example, you’d have a whopping $501,932.14 in 30 years!

10-year return on $25,000 at 10% APY
(Image from

Where do you put this money?

You want your retirement money in proper retirement accounts. That means an IRA and perhaps a 401k if your employer offers one. Maybe both. Here’s how to decide between the two.

  • Choose a mix of stock funds and bond funds that are appropriate for your age (when you’re young, it means more stocks and less bonds)
  • Make contributions every month to take advantage of dollar cost averaging
  • Rebalance your investment portfolio to keep the right mix of stocks and bonds (ex. your target is 70% stocks and 30% bonds, but your current portfolio has grown to 75% stocks and 25% bonds)

Whatever you do, don’t withdraw this money before you retire to let it grow to its full potential.

And that’s all there really is to it.

The Bottom Line

It’s easier to know where to put your savings when you’re able to separate what you need the money for. Once you know what your goals are, you can easily separate it by time horizon and invest the savings properly.

Short-term cash should be saved conservatively because you’ll need this money sooner rather than later. You shouldn’t take unnecessary risks that could jeopardize your principal balance.

Long-term money should be invested aggressively in order to achieve your retirement goals. You have time by your side and over 20, 30, or 40 years, no other investments have performed better than the stock market.

Recommendations To Super Charge Your Savings

Now that you’re better informed how to save your money, it’s time to manage your finances like a ninja! To do so, sign up for Empower, it’s the #1 free wealth management tool.

After you link up all your accounts, use their Retirement Planner forecaster. It pulls your real data to give you a pure projection of your financial future using over 5,000+ simulations. I’d definitely run your numbers to see how you’re doing and what you can do to optimize your finances.

I’ve been using Personal Capital since 2013. In that time, my net worth has skyrocketed thanks to better money management.

Personal Capital retirement planner projection example
(Image from Personal Capital)
About John Pham

John Pham is a personal finance expert, serial entrepreneur, and founder of The Money Ninja. He has also been fortunate enough to have appeared in the New York Times, Boston Globe, and U.S. News & World Report. John has a B.S. in Entrepreneurship and a Masters in Business Administration, both from the University of New Hampshire.

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Rich Stoney
Rich Stoney
2 years ago

Regarding I Bond purchases, is there any advantage to using a ladder stratergy?