Where to Put Your Money for Short-Term Savings

Short Term Savings

Saving $100,000 is not easy. It requires a lot of hard work, side hustle, persistence, and sacrifice. It is making me think about what is most important to spend money on and what’s less important. 

But once I’ve set aside money for my sabbatical, where am I keeping it? The market is roaring right now.

If I had bought $20,000 of Peloton stock last March, I would have more than $100,000 today! (Truly, Peloton was a stock I considered investing in when the market was down in March 2020. It was trading around $25/share. In the last few months, it’s been higher than $150/share. Coulda, woulda, shoulda.) 

But, as a fairly risk-averse person, I keep almost all of my money in index funds.

However, this isn’t where I keep my sabbatical savings. Stock index funds are for long-term investments. 

For short-term savings goals, where do I keep my money? I’m keeping it all in a high-interest savings account.

Interest rates are abysmal right now. At CapitalOne 360, the interest rate is 0.4%. But, it’s better than nothing. And I’m not willing to risk my sabbatical savings if the market hits a downturn. 

If you are interested in high-interest savings account arbitrage, you can move money around to chase promotional rates. However, these rates aren’t worth the time and effort to me.

You may also consider investing in bonds with your short-term savings, but the bond market does go down. These are considered a “safer” investment, but they aren’t guaranteed.

While this may seem incredibly boring, the best thing you can do with the money you save for a sabbatical is to keep it in cash. Not cash under your mattress, but in an FDIC insured bank account.

This post is part of our Sabbatical Sundays series. To read more, click here.

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