Where's the Best Place to Store $25k Now?
If you want to shelter some of your cash from market volatility, here are smart alternatives that'll outpace inflation and help you reach your goals.
Higher prices are here for now. The escalating Iran War will keep energy prices higher, impacting everything from groceries to air travel.
And the Federal Reserve took notice. At its September meeting, it raised the federal funds rate by a quarter of a point.
The rate increase could benefit savers if banks respond by raising rates on savings accounts and CDs. If you're looking to move $25,000 into savings and away from market volatility, I have a few strategies to consider. But first, you'll want to do this.
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Finding purpose can simplify decision-making
Every goal starts with one question: Why? This purpose can help you choose the right savings account.
If you have a time-specific goal, such as saving $25,000 for a dream vacation or planning a bigger home renovation, a certificate of deposit could be the smart choice. The best CD rates can earn you more than high-yield savings accounts.
I also like them because you can find a term that matches the timing of your goal, whether that's six months, one year, or even five years down the road.
You can find and compare the best CD terms for your goals using this Bankrate tool:
CDs have fixed interest rates, so once you lock one in, you can't earn more. If the Fed raises rates again in December, you could miss out on higher yields available on newer CDs.
Meanwhile, if you have $25,000 and don't have a time-specific goal, I recommend a short-term CD in the interim (think three to six months). This accomplishes two things: First, it positions you to take advantage of another rate hike if inflation remains elevated and the Fed raises rates again.
Second, if prices continually rise, you'll have quicker access to your cash, allowing you to pivot to other investments with higher earning potential. Then, you wouldn't have to worry about inflation eroding your purchasing power.
Savings accounts that outpace inflation and give you liquidity
I always recommend a high-yield savings account. You'll earn a much higher APY than you would with a traditional brick-and-mortar bank. And many online savings accounts don't come laden with fees, so you'll keep more of your money.
It's a smart option because you earn a return that outpaces inflation for now, and if your goals change, you have liquidity to make the changes whenever you need to.
When searching for the best high-yield savings accounts, here's my recommendation:
One more thing to note: High-yield savings accounts have variable interest rates. This places you in a great position to capitalize on higher returns if the Fed raises rates again.
Ultimately, now is the time for savers to make money moves with inflation remaining sticky and savings rates being higher. If you're looking to maximize your $25k and don't need to touch it, CDs are your best bet. You'll earn the highest returns and won't have to worry about Fed policy.
That said, if you want some flexibility while you figure out your next moves, a high-yield savings account or a short-term CD is a smart alternative. They keep you flexible while the economic conditions hopefully clarify in the coming months.
- Choose a certificate of deposit (CD): If you don't need immediate access to your $25,000 and want the peace of mind of earning a guaranteed return.
- Choose a high-yield savings account (HYSA): If you need liquidity, flexibility for shifting goals or the ability to capitalize on future rate hikes while keeping your cash accessible.
Not sure which option makes the most sense for your $25,000?
A financial adviser can help you weigh your savings goals, timeline and need for access to your money as part of your broader financial plan.
Use the tool below to connect with an adviser who can help you explore your options.
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