Most of us believe that investing should be for long-term goals. But there are many reasons for short-term investments depending on your financial goals.
Inflation is a killer of cash. Hence even money needed for the short-term should be invested. In everyone’s portfolio, there should be both short-term investments and long-term investments.
There is practically no risk of losing money in savings accounts. Savings accounts opened at a bank or a brokerage account are insured by the Federal Deposit Insurance Corporation (FDIC) from theft, fraud, or if the financial institution goes bankrupt.
They can pay more for a high-yield savings account because online banks do not have as high an overheard as regular brick-and-mortar banks do. But they do offer the same FDIC protections as traditional banks do.
Cash management accounts help people manage their money while earning interest. The best advantage of a cash management account is that it allows customers to do their banking and investing without switching between different accounts.
A money market account is like a savings account that could also have check-writing and debit card options. Unlike regular checking accounts, some money market accounts limit the number of checks you can write in a certain period.