With minimal risk, these funds are a good place for money you don't need on hand or want invested for the long term. Thinkstock By Lisa Gerstner, Contributing Editor From Kiplinger's Personal Finance, May 2015 Savings can generally be divided into two pots: cash that must be shielded from losses and money that can tolerate a little investment risk. Short-term savings that fall into the first category should reside in federally insured deposit accounts. Top-yielding savings accounts and one-year certificates of deposit are earning 1% or more. See Also: Best Ways to Earn More Interest On Your Savings But maybe you have, say, interest and dividend income that you’re holding to invest later. Money that you put in a high-yielding insured account may not be as readily available as cash in an account that’s tied directly to your brokerage accounts. But money market mutual funds are currently yielding next to nothing. Ultra-short bond funds provide an opportunity to earn a better yield without incurring much more risk. The average maturity of fund holdings is often about a year. So although yields are lower than those of longer-term bond funds, the funds are less vulnerable to rising interest rates (when interest rates increase, bond prices fall). Watch out, though, for high expenses, which can eat into gains. And look for funds that hold mostly high-quality debt, such as government-backed bonds and investment-grade corporate bonds. Advertisement Baird Ultra Short Bond Investor (symbol BUBSX) invests in short-term Treasury bonds and low-risk corporate bonds and mortgages; it has a 0.40% expense ratio and recently yielded 0.7%. Northern Ultra-Short Fixed Income Fund (NUSFX), with annual expenses of 0.25% and a 0.7% yield, holds a solid mix that includes corporate bonds and Treasuries. Vanguard's new Ultra-Short-Term Bond (VUBFX) invests in high-quality debt, with a 0.5% yield and a low 0.20% expense ratio.