What’s got you thinking about short term investments? Maybe you just got a bonus from your boss, or made a great sale on Facebook Marketplace, and now you’ve got some extra cash burning a hole in your pocket.

You may be trying to figure out what to spend that money on; new clothes, some fancy cookware, maybe those nice headphones you’ve had your eye on? Or perhaps, most exciting of all, that short-term investment you’ve been thinking about?

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Okay, short-term investments may not be as exciting as a new pair of Beats, but they are a great way to make your money work harder for you. Read on to discover some of the best short-term investment options that can help you grow your wealth in a short span of time.

What Is a Short-Term Investment?

Before we dive into all the best investments you can make, let’s talk about what short-term investments are.

As the name suggests, a short-term investment generally gets converted back to cash quicker than its long-term cousin. In general, short-term investments don’t last more than three years and may turn around in as little as three months.

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Short-term investments are a good idea if you have some free money at the moment and you want to make the most of it. They can also be helpful for people planning for a major spending event that’s likely to happen within the next three years.

These 2021 investments can get you a little more money without locking you into a long-term commitment.

How They Work

Short-term investments tend to operate with higher levels of interest than you might get from just keeping the money in the bank. (Though, as we’ll discuss, savings accounts are a good short-term investment option.)

They also tend to be fairly low-risk investments, unlike some traditional stock investment options. The returns are somewhat lower, but you don’t risk losing as much money on your investment.

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If you put money into the stock market and leave it there for ten years, you’re very likely to come out ahead on your investment.

But if you need to pull that money back out after just three months, there’s no guaranteeing that you’ll make money at all. Short-term investments tend to be more stable and offer a more reliable return on your investment in a shorter time period.

Savings Accounts

If you need to keep access to your money but you want to earn more interest on it than you get in a checking account, a savings account may be a good option for you.

These accounts are meant for just what they say: saving money for your financial goals or emergency needs. They generally come with small interest rates, usually around 0.05 percent, that can help you grow your money.

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There are different types of savings accounts with different rules and interest amounts. A savings account that allows you to transfer money out whenever you want may have a lower interest rate. But a savings account that requires you to go to the bank to withdraw money may also grant you a higher interest rate. 

Money Market Accounts

One of the options for a higher-interest savings account is opening a money market account. In general, these accounts operate just like savings accounts.  The exception is that they have more restrictions and higher deposit requirements.

You can continue to add money to them and pull money out when you need it, provided you stay within the account requirements.

In general, banks require customers who are opening money market accounts to put down a certain amount of money when they open the account. They may also have to keep their account balance above a certain level in order to avoid fees.

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However, this higher level of investment pays off in interest rates, which can be as high as 1.5 percent, though the average is 0.08 percent.

Cash Management Accounts

If you need access to a larger cash flow on a more regular basis, a cash management account may be a good option for you. In many ways, they act a lot like a traditional bank account. Some cash management accounts offer options for check writing, bill pay, money transfers, mobile bill pay, and more.

However, these accounts are offered by online robo-brokers, rather than traditional financial institutions.

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Cash-management accounts can be a fantastic way to keep access to your money and earn more interest. Unlike other savings accounts, these accounts typically do not have minimum balance requirements or withdrawal limitations.

They also usually offer interest rates between a quarter and a half of a percent, much higher than other savings account options. 

Certificates of Deposit

If you know you won’t need the money you’re investing for a certain period of time, you may want to look into getting a certificate of deposit (CD). These investments require you to lock your money away and not access it for a pre-set period of time.

These time periods can vary and often range somewhere between three months and five years. 

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However, if you can live without that money for the length of the CD, you can benefit from a higher, pre-determined interest rate. In most cases, the longer you agree to lock your money away for, the higher the interest rate you’ll get.

Most CDs have interest rates around 0.8 percent, significantly higher than what you’ll get off a traditional savings account.

Short-Term Corporate Bond Funds

If you want a little more return on your investment, you may consider buying a short-term corporate bond or buying into a corporate bond fund.

Sometimes when companies want to make investments in their business, they’ll turn to the public to raise the funds they need. They manage this by issuing bonds which they’ll pay back when their investment pays out for them.

You can buy a single corporate bond, but if you want a safer investment, you may consider buying into a corporate bond fund.

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These funds are groupings of multiple different corporate bonds. If one bond goes bad, you won’t risk losing as much money, since your investment will be covered by the performance of the other bonds in the fund.

Short-Term U.S. Government Bond Funds

If the idea of bonds appeals to you but you’d like a little more security in your investment, short-term U.S. government bond funds may be a good option for you. At their core, these bonds work the same way the corporate bonds we discussed do.

The only difference is that, instead of funding a business’s investments and operations, you’re funding the government’s operations.

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In general, you can buy or sell short-term government bonds as needed on any day that the stock market is open. They are backed by the full force of the United States government, so they’re considered a very safe investment.

You can expect to get around 2 percent interest on these bonds and still be able to access your money when you need it.

Municipal Bonds 

Another great option for investing in bonds and bond funds is buying municipal bonds.

Like corporate and government bonds, these investments grant money to an organization to allow them to take on any expansions they may need to do. But in this case, your bond money will go to your local city, county, or state government, rather than the federal government or a corporation. 

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One of the huge benefits of getting a municipal bond is that they often come with higher interest rates.

The money you make off of these bonds is usually exempt from income tax, which can help you make the most of those dividends. You also get the benefit of knowing you’re helping to make your community better by funding your local government.

Treasuries 

Treasuries are essentially the governmental equivalent of a single corporate bond. When you buy into a government bond fund, your money may be going to support a wide variety of different projects.

But when you buy a treasury, all your money stays in one specific security, which you can select depending on your needs.

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There are three basic types of treasury: T-bills, T-bonds, and T-notes, and all of these are considered very safe. Even though you’re buying into a single security, your investment is backed by the government, so you can be sure you won’t lose money.

And like the other bonds we’ve discussed here, you can generally expect to get about 2 percent back on your investment.

Peer-to-Peer Loans

If you need a little extra cash and you’re willing to take on some extra risk to get it, peer-to-peer loans can be a good option for you.

These loans can come with a return of 5 percent on your investment or more, depending on the situation. But they are also relatively risky, since they require the person you’re investing in to hold up their end of the deal.

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With a peer-to-peer loan, you allow another person to borrow money from you to pay any number of expenses, ranging from medical bills to home improvement costs.

The borrower pays you back on a set timeline, along with the interest rate you agreed to. If you work through a peer-to-peer loan platform, you can see how borrowers rank in creditworthiness, and you may consider making multiple small loans, rather than one large one, to reduce your risk. 

Roth IRAs

You might be surprised to see Roth IRAs on a list of good short-term investment options.

These specialized individual retirement accounts are generally intended to be used for long-term savings, rather than short-term investments. But the good news is that, unlike some other retirement options, Roth IRAs allow you to withdraw contributions at any time without penalties or fees.

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Roth IRAs generally have higher interest rates than traditional savings accounts since they’re intended to be used as long-term accounts.

And it is important to note that you can only withdraw your contributions – not any gains you’ve made on the account. If you want to invest money in your future, but you need to be able to access that cash again, these accounts are a great option.

Cash Back Reward Offers

One creative way to make the most of your money without tying it up in a savings account or bond is to take advantage of cash back reward offers.

Many banks and financial institutions offer reward programs for their members who spend certain amounts of money with them. For instance, some credit cards will give you a certain percentage of cash back in rewards for every dollar you spend on groceries, gas, or other purchases.

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Taking advantage of these programs can be a great way to grow your money without having to contribute a chunk of money to an investment.

You simply move your daily expenses from a debit card (which may earn you no rewards) to a reward-bearing credit card. You spend the same amount of money, but you get the extra cash back from your bank as a bonus.

Cryptocurrency Savings Accounts

In recent years, cryptocurrency savings accounts have become popular as a way for investors to grow their money.

Cryptocurrencies like Bitcoin can offer a variety of benefits, including more direct control over your money and assets that are immune to government seizure. And because these are different currencies, you can take advantage of rising exchange rates in up-and-coming cryptocurrencies. 

In order to invest in cryptocurrency, you’ll need to pick a currency and buy some units in that currency.

Then sit back and keep an eye on the market and the changing value of that currency. When the exchange rate reaches a point higher than what you paid for the currency, you can sell it and take the extra profits on your investment straight to the bank.

Discover More Great Short-Term Investments 

Whether you’re trying to save for an upcoming expense or make the most of some extra cash, short-term investments can be a great way to make your money work harder for you.

Whether you put your money into a savings account, buy a bond, or buy cryptocurrency, you can come out the other side with more cash in hand. Make sure you keep in mind how soon you’ll need that money again and how much risk you’re willing to take to get a return on your investment. 

If you’d like to explore more cryptocurrency investing options, check out the rest of our site at Byte Federal. We have Bitcoin ATMs around the country, as well as the resources you need to get into the Bitcoin world.

Find an ATM near you today and start finding the financial tools you need to thrive.