Best Short-Term Investment Options (2025)

Answer Box: TL;DR

Letting cash sit in checking or low-yield savings in 2025 is quietly costing you money. In this video, Dan breaks down five smarter short-term investment options—high-yield savings, CDs, I Bonds, Treasury ETFs, and T-bills—so you can match your cash to the right vehicle based on liquidity, yield, time horizon, and tax impact. These aren’t get-rich-quick plays, but practical ways to make your idle cash work harder without taking stock-market-level risk or locking it away for decades.

Key Takeaways

Checking & low-yield savings are “silent loss” zones.
- Most checking accounts pay effectively zero interest and are only good for bill-paying and day-to-day cash flow.
- Many traditional savings accounts at big banks still pay under 1% in 2025, even as better options pay several times more.
- With inflation, that means your cash is losing purchasing power every year it sits idle.
Option 1 – High-yield savings accounts (HYSAs).
- Great for emergency funds and short-term goals that require quick access.
- Some platforms pay around 4–5% in interest (subject to change with Fed policy).
- Very liquid, easy transfers, and can be automated from your paycheck—“set it and forget it.”
- Downside: rates move with the Fed, and interest is fully taxable as ordinary income at federal and possibly state/local levels.
Option 2 – Certificates of deposit (CDs).
- “Old school” but still useful if you think rates may fall and want to lock in today’s yields.
- Common terms: 3, 6, or 12 months and longer—the longer the term, typically the higher the rate.
- Predictable and safe, but your money is locked up; early withdrawals usually trigger penalties.
- Interest is fully taxable; a CD ladder (staggered maturities) can improve liquidity.
Option 3 – I Bonds.
- One of the few vehicles that combine inflation protection and tax advantages.
- Current fixed component is around 1.2%, locked in for up to 30 years and added to the inflation adjustment.
- Exempt from state and local taxes, which is valuable in high-tax states.
- Drawbacks: must hold at least 12 months; cashing out before 5 years costs you 3 months of interest—better for multi-year money.
Option 4 – Treasury ETFs.
- ETFs that hold short-term U.S. Treasury bills (typically maturing in under 3 months).
- Pay interest monthly, are very liquid, and trade like any stock or ETF.
- Often yield more than HYSAs without the friction of buying individual T-bills.
- Downsides: small management fee, partial state tax advantage (often ~96% exempt, but not 100%), and more complex tax reporting, including potential capital gains.
Option 5 – Traditional Treasury bills (T-bills).
- Short-term U.S. government securities bought via brokerage or TreasuryDirect, with terms from 1 month to 1 year.
- When held to maturity, they’re among the cleanest low-risk income options available.
- Interest is exempt from state and local taxes, which boosts after-tax yield.
- You can build a T-bill ladder for ongoing maturity and liquidity; often yields beat HYSAs in this environment.
- Not ideal if you need money tomorrow—this is planned cash flow, not “swipe your debit card” money.
Match the vehicle to your goal.
- For maximum liquidity & automation: high-yield savings.
- For locking in a fixed rate: CDs.
- For inflation protection: I Bonds.
- For flexibility & yield above a bank: Treasury ETFs.
- For clean, direct, tax-efficient yield: laddered T-bills.
Key decision drivers.
- Always weigh: liquidity, yield, risk, and tax impact.
- The “best” option depends on when you’ll need the money and how much volatility/tax complexity you’re willing to accept.

Key Moments

(00:00) – The problem with cash in checking. Dan opens by explaining why keeping excess cash in a checking account in 2025 is like “lighting your money on fire” due to ultra-low yields and inflation.
(00:25) – What this video will cover. He outlines five short-term investment options: high-yield savings accounts, bonds/CDs, Treasury ETFs, and T-bills.
(00:52–01:18) – Where NOT to park your cash. Dan highlights how checking and traditional savings accounts often pay near-zero interest and can even charge fees.
(01:18–01:43) – Physical cash issues. He points out that physical cash earns nothing and loses value over time in an inflationary environment.
(01:43–02:08) – Option 1: High-yield savings. Dan explains why HYSAs are ideal for emergency funds and day-to-day short-term goals, with current yields around 4–5% (subject to change).
(02:08–02:34) – HYSA downsides. He notes that HYSA rates move with the Fed and that interest is fully taxable as ordinary income.
(02:34–02:58) – Option 2: CDs. Dan walks through how CDs work, why they’re useful when you expect falling rates, and the trade-off of locking up your funds.
(02:58–03:23) – CD laddering. He describes a CD ladder to manage liquidity by staggering maturities.
(03:23–03:47) – Option 3: I Bonds. Dan explains the inflation protection, 1.2% fixed component, and state/local tax benefits of I Bonds.
(03:47–04:14) – I Bond restrictions. He emphasizes the 12-month no-access rule and the 3-month interest penalty if redeemed within 1–5 years.
(04:14–04:41) – Option 4: Treasury ETFs. Dan introduces Treasury ETFs as a way to get short-term T-bill exposure with high liquidity and monthly interest payments.
(04:41–05:01) – Treasury ETF trade-offs. He notes fees, partial state tax benefit, and more complicated tax reporting (including capital gains).
(05:01–05:25) – Option 5: Traditional T-bills. Dan explains buying T-bills directly (1–12 months), their low risk, and state/local tax advantages.
(05:25–05:50) – T-bill laddering & planning. He covers building a T-bill ladder and why this is a planned cash-flow move, not a daily spending account.
(05:50–06:37) – Matching options to goals. Dan summarizes which vehicle fits which objective—liquidity, fixed rate, inflation protection, flexibility, or tax-efficient yield.
(06:37–end) – Final advice & CTA. He encourages viewers to weigh liquidity, yield, risk, and tax impact, and to share/subscribe for more no-fluff investing guides.

Episode Summary

In this video, Dan tackles a common but costly habit: leaving too much money sitting in checking or low-yield savings accounts in 2025. He explains that while these accounts are convenient for paying bills and holding day-to-day spending money, they are terrible long-term parking spots for larger cash balances because they earn virtually nothing. When you factor in inflation, that “safe” cash is actually losing purchasing power every year.

To fix this, Dan walks through five practical short-term investment options that can help your cash work harder without turning you into a full-time trader. First up is the high-yield savings account, which he positions as an “emergency fund on steroids”—liquid, easy to automate, and currently yielding significantly more than traditional savings. He notes, however, that HYSA rates move with the Fed and all interest is fully taxable. Next are certificates of deposit (CDs), which let you lock in a fixed rate for a set term. They shine when you expect rates to fall, but you sacrifice some liquidity unless you build a CD ladder with staggered maturities.

Dan then shifts to I Bonds, highlighting their rare combination of an inflation-adjusted rate, a fixed component (currently around 1.2%), and exemption from state and local taxes—a big plus for high-tax states. The catch: you can’t touch the money for 12 months, and early redemption (within 5 years) costs you 3 months of interest, making them better for multi-year cash, not short-term emergency funds. For investors who want market-based flexibility without the hassle of buying individual Treasurys, he introduces Treasury ETFs—funds holding very short-term T-bills that pay monthly interest, trade intraday, and often yield more than bank accounts, albeit with small fees and more complex tax reporting.

Finally, he covers traditional Treasury bills (T-bills), which you can buy directly through a brokerage or TreasuryDirect. With terms from one month to a year, T-bills are among the cleanest low-risk income options, and their interest is exempt from state and local taxes. By building a T-bill ladder, you can create a steady schedule of maturing securities to support ongoing liquidity needs. Dan wraps up by summarizing which vehicle fits which goal—liquidity, fixed rate, inflation protection, flexibility, or tax efficiency—and urges viewers to stop hoarding idle cash in checking and instead choose a deliberate, goal-aligned home for their short-term money.

Full Transcript

Dan: Are you still keeping cash in your checking account in 2025? That’s basically lighting your money on fire. You’re earning next to nothing. And in this interest rate environment, that’s a silent loss.

Dan: Today, I’m going to walk you through smarter short-term investment options. We’ll talk about high-yield savings accounts, bonds, CDs, Treasury ETFs, and T-bills.

Dan: Listen, these aren’t get-rich quick schemes. They’re real risk-appropriate places to park your cash and earn more without locking it away forever or gambling in the market. And by the end of this video, you’ll know exactly which option makes the most sense for your money. Whether your objective is liquidity, income, or peace of mind, let’s start with where not to put your cash.

Dan: Your checking account. It’s great for paying bills, but terrible for holding your money. You’re lucky if it pays 1/100th of a percentage point in interest. And no, that is not a rounding error.

Dan: Traditional savings accounts aren’t much better. Some banks, big traditional names, are paying less than 1% while still charging you fees just to hold your money.

Dan: That’s not a savings strategy. That’s a slow bleed.

Dan: And physical cash. Let’s be real, when’s the last time you actually used paper money? It earns nothing. And in inflationary times, it loses value as it sits idle.

Dan: So, where should you park short-term cash in 2025? Option one, high-yield savings accounts. These are the most flexible and automated options.

Dan: You can think of it like your emergency fund on steroids. Today, some platforms are offering between 4 and 5% as an interest rate. The money is liquid, the transfers are fast, and you can automate distributions from your paycheck. Set it and forget it.

Dan: But a few downsides. Interest rates move with the Fed. So, if they lower rates, your returns get lowered as well.

Dan: And all the interest you earn is fully taxable as ordinary income, federal, state, and local, depending on where you live. Still, for daily cash needs and near-term goals, it’s a solid option.

Dan: Option two, certificates of deposit. CDs are the old school play, but they still have a role, especially if you think interest rates are going to fall.

Dan: You lock in a fixed rate for a set term—three months, six months, or a year or more. The longer the term, the better the rate. It’s predictable, it’s safe, and it lets you front-run a falling rate environment.

Dan: The downsides: your money is locked, and if you withdraw early, you’ll likely pay a penalty.

Dan: And yes, interest here is also fully taxable. One way to work around the liquidity issue is CD laddering. You split your investment across multiple CDs with staggered maturities, so you’re never too far from cashing out a portion.

Dan: Option three, I Bonds. These are often overlooked, but they’re one of the only vehicles that offer inflation protection and tax advantages.

Dan: Right now, the fixed component is 1.2%, which doesn’t sound huge until you realize that it’s locked in for up to 30 years and it’s added on top of the inflation adjustment. And here’s the bonus: I Bonds are exempt from state and local taxes. That’s a real edge if you live in a high-tax state.

Dan: Now, here’s the catch. You can’t touch your money for at least 12 months. And if you cash out between years one and five, you forfeit three months’ worth of interest.

Dan: So, while I Bonds are fantastic for conservative long-term holdings, this isn’t the “get the cash back next month” account.

Dan: Option four, Treasury ETFs. If you want exposure to Treasury bills without buying them directly, this is for you.

Dan: These ETFs hold short-term U.S. Treasury bills, typically maturing in less than three months, and they pay out interest monthly. They’re super liquid and you can trade them like any stock or ETF.

Dan: And they tend to offer better returns than high-yield savings without the hassle of buying individual T-bills. The downsides: there’s a small management fee, usually around 9/10 of a percent.

Dan: And while they’re tax advantaged, they’re not fully exempt from state and local taxes. About 96% of it typically is, but not all of it. And because they’re ETFs, tax reporting can get a little trickier than your average bank account. You’ll likely have to deal with some capital gains reporting if you’re selling shares regularly.

Dan: Option five, traditional Treasury bills. Now we’re talking direct ownership. T-bills are short-term government securities that you can buy through your brokerage or directly at TreasuryDirect.gov.

Dan: Terms range from one month to one year. And when held to maturity, they’re one of the cleanest, low-risk income options available.

Dan: No state or local tax on interest, and you can build a T-bill ladder, just like CDs, to ensure regular maturity and ongoing access to liquidity. The interest rates are auction-based, so they fluctuate, but right now, they’re often beating high-yield savings.

Dan: Just keep in mind: if you need that cash tomorrow, T-bills aren’t ideal unless they’re maturing soon. This is a planned cash flow move, not a swipe-your-debit-card type of investment.

Dan: So, what’s the right move for you? If you want full liquidity and automation, high-yield savings. If you want to lock in a fixed rate, go with CDs. If you’re looking to protect against inflation, I Bonds.

Dan: If you want flexibility and better returns than a bank, Treasury ETFs. And if you want clean, direct, tax-efficient yield, look at laddered T-bills.

Dan: Now you’ve got the full picture—five short-term investments that actually work in 2025.

Dan: If you’re still unsure where to start, review the pros and cons and match them to your actual goals. Liquidity, yield, risk, tax impact. These are the trade-offs to weigh.

Dan: And if you found this breakdown helpful, hit like, maybe share it with someone still hoarding cash, and subscribe to our newsletter in the comments below for more no-fluff guides to smarter investing. You deserve to make your money work for you.

Resources & Concepts Mentioned

High-yield savings account (HYSA): Online or platform-based savings accounts that offer significantly higher interest rates than traditional bank savings.
Certificates of deposit (CDs): Time deposits with fixed terms and fixed interest rates, often used when you want guaranteed yield over a set period.
I Bonds: U.S. savings bonds with a fixed rate plus inflation adjustment, exempt from state/local taxes and designed to protect purchasing power.
Treasury ETFs: Exchange-traded funds that hold short-term U.S. Treasury bills, offering liquidity and diversified T-bill exposure.
Treasury bills (T-bills): Short-term U.S. government securities (1–12 months) that are considered low risk and offer state/local tax advantages.
CD/T-bill laddering: A strategy of staggering maturity dates to balance yield and liquidity.

FAQs

How much cash should I keep in checking vs. these short-term options?

Generally, you only need enough in checking to cover near-term bills and a small buffer. The rest of your emergency fund and short-term savings can often sit in a high-yield savings account or other short-term vehicles, depending on when you’ll need the money. The key is to avoid letting large balances sit in accounts earning near-zero interest.

Are high-yield savings accounts safe?

Most reputable HYSAs are offered by banks or credit unions that are FDIC or NCUA insured up to applicable limits. That means your deposits are protected up to those thresholds if the institution fails. Always verify the institution’s insurance status and stick with trusted providers.

Should I use CDs or T-bills if I might need money in 6–12 months?

If the timing of your need is fairly predictable, a CD or T-bill maturing just before that date can make sense and may offer a higher yield than a HYSA. If your timing is uncertain, you might prefer a ladder (staggered maturities) or keep more in a HYSA for flexibility.

Are I Bonds good for an emergency fund?

Not usually. I Bonds require you to hold them for at least 12 months, so they don’t work for “true” emergency fund dollars you might need tomorrow. They can, however, be a strong option for multi-year cash reserves where inflation protection and tax benefits matter.

What’s the main advantage of T-bills over a high-yield savings account?

T-bills often provide a competitive or higher yield and their interest is exempt from state and local taxes, which can improve after-tax returns—especially in higher-tax states. The trade-off is lower day-to-day liquidity; you usually plan around maturity dates rather than accessing funds instantly.

Do I need a financial advisor to use these options?

You can access HYSAs, CDs, T-bills, and many Treasury ETFs on your own through banks and brokerage platforms. That said, an advisor can help you coordinate these choices with your overall plan, especially if you have large balances, complex taxes, or you’re integrating short-term vehicles with long-term investments.

Disclaimer

This video and written summary are for educational and informational purposes only and do not constitute investment, tax, or legal advice. They do not create a client relationship with Tailored Wealth or any related entity.

All investments, including high-yield savings, CDs, I Bonds, Treasury ETFs, and T-bills, involve risks and trade-offs, including potential loss of purchasing power, interest rate risk, and tax consequences. Interest rates and tax laws change over time and may affect the strategies discussed. Before making any financial decisions, you should consult with:

A licensed financial advisor or planner
A qualified tax professional
Other appropriate professionals as needed

Any rates or yields mentioned are illustrative and may not reflect current or future market conditions.

Next Steps

If you’re holding more cash than you need in checking or low-yield savings:

Calculate your true cash needs: Separate day-to-day spending from emergency funds and near-term goals.
Move excess cash: Consider shifting surplus balance into a high-yield savings account as a first step.
Match timelines to tools: Use CDs or T-bills for money you’ll need in 3–12 months, and I Bonds for multi-year reserves.
Consider tax impact: Pay attention to how interest is taxed at the federal and state level when choosing between options.
Review annually: Revisit your cash strategy each year—or when rates move—to ensure your money is still working efficiently.

Your cash doesn’t have to sit idle. With a few deliberate moves, you can keep flexibility and earn more on the money you’ve worked hard to save.