Best Places to Park Your Cash [2024]: Should You Save Or Invest?

When it comes to managing your money, determining where to keep your cash is crucial.

Some of the best options for parking your cash are high-yield savings accounts, money market accounts, short-term Treasury bills and notes, certificates of deposit, and money market funds.

Let’s take a closer look at the best places to park your cash to earn more interest and keep your money safe.

High-yield savings accounts (HYSAs) are popular bank accounts for parking cash because they offer higher interest rates than traditional savings accounts, which will help your money grow faster. Plus, some HYSAs are insured by the Federal Deposit Insurance Corporation (FDIC), meaning depositors are protected to a sum of at least $250,000.

Be sure to compare annual percentage yields (APYs) and fees across banks and credit unions when you’re looking for a HYSA. Some accounts may have high minimum balance requirements, require direct deposits, or charge monthly maintenance fees, which can eat into your earnings. The interest earned on HYSAs is also taxed like ordinary income.

Another thing to consider is accessibility. HYSAs may restrict how often you can withdraw your money or require a certain minimum balance to earn the highest APY rate. If you need to access your cash frequently, look for an account with no withdrawal restrictions. Some HYSAs are online savings accounts offered by online banks, meaning they have no physical branches you can visit.

The best savings accounts offer higher APYs than large banks like JP Morgan Chase or Bank of America. A high-yield savings account can be a good option for parking cash if you're looking for a safe and accessible place to earn more interest rather than a traditional savings account. Explore our top HYSA recommendations that have no minimum balance requirements.

A money market account is another deposit account type that offers features found in both checking and savings accounts. They typically offer higher APY rates than checking accounts and easier accessibility to your money via debit cards and checks. Some money market accounts also come with FDIC insurance.

When deciding if a money market account is worth it, remember that money market accounts may require a higher minimum deposit to open and maintain the account compared to a regular savings account. Some money market accounts may also have monthly maintenance or transaction fees. The interest you earn on money market accounts is also taxed on a federal level.

If you’re looking to take on slightly more risk for a potential of a higher return, consider investing in U.S. Treasury bills and notes. T-bills are debt securities that mature in one month to one year, making them short-term investments, whereas T-notes work as medium- to long-term investments that mature in two to ten years. Since the U.S. government backs Treasury bills and notes, they’re regarded as one of the safest investments available.

They can also offer higher yields than savings accounts and money market accounts. While yields on these securities can fluctuate, they generally offer higher returns than other low-risk options. You can buy T-bills and notes from TreasuryDirect.gov.

Treasury bills and notes are highly liquid, meaning you can easily sell them if you need to access your cash quickly. However, if you need to sell your T-bills or notes before they mature, you may receive less than the face value of the security due to changes in interest rates.

Another consideration is the tax implications of investing in Treasury securities. While they are exempt from state and local taxes, you will still owe federal taxes on any interest income you earn.

Certificates of deposit are commonly referred to as CDs. CDs are low-risk investments that offer a fixed APY rate for a set period, ranging from a few months to several years. They can sometimes be FDIC-insured as well.

One of the benefits of CDs is that they offer higher APY rates compared to traditional savings accounts. The longer the term of the CD, the higher the APY rate. For example, CIT Bank offers Jumbo CDs with rates of 0.40%-0.50% (as of Sep. 5, 2023).

CDs are a great option if you have a lump sum of cash that you don't need immediate access to, but they’re not very liquid. You can review our list of the best CD accounts to find one that is right for you.

You cannot withdraw your money before the term is up without incurring a penalty. And since the APY rates CDs are set when you park your cash there, they may not keep pace with inflation. If the inflation rate exceeds your CD's APY rate, you may lose purchasing power over time.

Money market funds invest in low-risk securities such as certificates of deposit, municipal securities, and government bonds. They are designed to provide a higher yield than traditional savings accounts while maintaining high liquidity. You can typically buy and sell shares of the fund at any time.

One of the benefits of money market funds is that they are typically very low-risk investments. This means that your principal investment is relatively safe, and you can expect to earn a modest return on your investment.

However, money market funds are not FDIC-insured. While they are relatively safe investments, there is always some risk involved. Additionally, the yields on these funds can fluctuate depending on market conditions, so you may not always earn the same return on your investment.

What is the safest place to park cash?

FDIC-insured savings accounts are the safest place to park your cash. If your bank offers FDIC insurance, that guarantees your deposits are protected for at least $250,000 in the event of a bank failure. This means you'll get your money back even if the bank goes bankrupt.

Where is the best place to park cash for a house?

If you're saving up for a down payment on a house, consider parking your cash in a high-yield savings account. High-yield savings accounts offer higher APY rates than traditional savings accounts, which means you'll earn more money on your cash. Look for an account with no monthly fees or minimum balance requirements. Also, make sure the account is FDIC-insured for safety.

How do you choose the right high-yield savings account for your cash?

When choosing a high-yield savings account, look for one with no fees and a competitive APY rate. Some accounts may require a minimum balance, so make sure you can meet the requirement. Also, research the bank's reputation and customer service. You want to make sure you're working with a reputable bank that is FDIC-insured and has good customer service in case you need assistance

Ultimately, the best place to park your cash will depend on your personal finances. Review your short-term and long-term financial plans, risk tolerance, and liquidity needs. By considering these factors, you can make an informed decision on where to park your cash.

It's essential to carefully weigh the pros and cons of each option, such as APY rates, liquidity, and risk. For example, high-yield savings and money market accounts are generally low-risk and offer easy access to your funds but may have lower APY rates than other options. CDs and T-notes may offer higher APY rates, but they also require you to lock up your money for a certain period of time.

Remember, there is no one-size-fits-all answer to the question of the best place to park your cash. Take the time to evaluate your options and choose the one that's right for you. And if you need regular access to your cash or an early withdrawal, a checking account or savings account may be the best option.

If you’re ready to open a savings or money market account, check out our list of best banks.