Recently a client assumed the role of caretake for her mother. The mother had recently gone into assisted living so the daughter sold the home to generate cash to help pay for
some of those expenses. She asked us how she needed to invest the money.
She needed quick access to funds. She also needed stability; significant value swings like we see in equity-based investment wouldn’t work.
Here are the options we discussed with her:
High-Yield Savings Accounts: The Easy Button
If you need to tap into the money quickly, a high-yield savings account is your buddy. These accounts generally offer better interest rates than traditional savings accounts
and are FDIC-insured, so your money is safe.
Certificates of Deposit (CDs): Safe but Less Flexible
CDs are like savings accounts with a twist—you lock in your money for a set period (3 months to 5 years) and earn a fixed interest rate. If you’re confident you won’t need the
money for a while, this could be a good option.
Short-Term Bond Funds: A Middle Ground
Bond funds invest in government or corporate bonds and offer regular income. Short term ones are less volatile and more liquid than long-term bonds. However, due to the nature of bond pricing, even short-term bond funds can experience downward volatility.
Money Market Accounts or Funds: Like Savings, But with a Boost
These are similar to high-yield savings accounts but may offer slightly better returns and check-writing privileges, but without the FDIC insurance. They’re great for keeping cash
accessible while earning a bit more.
An experienced financial advisor can help you better understand these options and choose one of a mix of several that are appropriate for your circumstances.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.