Nathan Hawrot | Dec 23 2025 14:00
Short-Term Investment Options: Safety First, But What About Returns?
Short-Term Investment Options: Safety First, But What About Returns?
This is the first post in our series on investment options, starting with short-term strategies that prioritize safety and liquidity. These vehicles are often used for emergency funds or near-term goals, but they come with trade-offs—mainly lower returns and inflation risk. Understanding these options helps you make informed decisions about where to keep your money while balancing security and growth.
Cash at Home
Description:
Keeping physical cash at home provides immediate access for emergencies and avoids banking restrictions.
Example:$1,000 stored in a home safe.
Pros and Cons: Cash offers instant liquidity and zero market risk, making it useful for emergencies. However, it earns no interest, loses value to inflation, and carries security risks such as theft or loss.
Historical Returns:
- Gross: 0% for 3, 5, and 10 years
- Inflation-adjusted: Negative in all periods
(Cash does not earn returns.)
Savings & Checking Accounts
Description:
Bank accounts designed for everyday transactions and short-term savings, offering FDIC insurance and easy access.
Example:$10,000 in a standard savings account at a local bank.
Pros and Cons: These accounts are safe, liquid, and simple to use, but interest rates are extremely low—often near zero—making them vulnerable to inflation and unsuitable for long-term growth.
Historical Returns:
- 3 years: ~0.03%
- 5 years: ~0.03%
- 10 years: ~0.04%
Inflation-adjusted: Negative in all periods
(Source: FDIC national averages)
High-Yield Savings Accounts
Description:
Online or specialized accounts offering higher interest rates than traditional savings while maintaining FDIC insurance.
Example:$10,000 in an online high-yield savings account.
Pros and Cons: High-yield savings accounts provide better rates than standard savings and maintain liquidity and safety. However, returns remain modest compared to market investments, and inflation can still erode purchasing power over time.
Historical Returns:
- 3 years: ~3.5%
- 5 years: ~2.2%
- 10 years: ~1.5%
Inflation-adjusted: Slightly positive short-term, near zero long-term
(Source: Bankrate, FDIC)
Certificates of Deposit (CDs)
Description:
Time deposits with banks that lock in your money for a set term in exchange for a guaranteed interest rate.
Example:$10,000 in a 12-month CD at a major bank.
Pros and Cons: CDs offer predictable returns and FDIC insurance, making them low-risk. The downside is limited liquidity and penalties for early withdrawal, and returns often fail to keep pace with inflation.
Historical Returns:
- 3 years: ~3.0%
- 5 years: ~2.0%
- 10 years: ~1.5%
Inflation-adjusted: Near zero or slightly negative long-term
(Source: FDIC national averages)
Savings Bonds
Description:
Government-backed bonds like Series I or EE that offer safety and modest returns, sometimes tied to inflation.
Example:$10,000 in Series I bonds purchased through TreasuryDirect.
Pros and Cons: Savings bonds provide government-backed security and inflation protection, but they have purchase limits, limited liquidity, and variable rates that may not always outperform inflation.
Historical Returns:
- 3 years: ~4.3%
- 5 years: ~3.0%
- 10 years: ~2.5%
Inflation-adjusted: Positive short-term, modest long-term
(Source: U.S. Treasury)
Treasury Bills
Description:
Short-term government securities (maturity under one year) offering safety and liquidity.
Example:$10,000 in 3-month T-bills purchased via TreasuryDirect.
Pros and Cons: Treasury bills are backed by the U.S. government and highly liquid, making them a safe parking spot for cash. However, returns are low and inflation can reduce real value, especially over longer periods.
Historical Returns:
- 3 years: ~4.5%
- 5 years: ~2.8%
- 10 years: ~1.8%
Inflation-adjusted: Slightly positive short-term, near zero long-term
(Source: U.S. Treasury)
Comparison Table
| Investment Type | Liquidity | Risk Level | 3-Yr Gross | 3-Yr Inflation Adj | 10-Yr Gross | 10-Yr Inflation Adj |
|---|---|---|---|---|---|---|
| Cash at Home | Immediate | None | 0% | Negative | 0% | Negative |
| Savings Account | High | Very Low | 0.03% | Negative | 0.04% | Negative |
| High-Yield Savings | High | Very Low | 3.5% | ~1% | 1.5% | Negative |
| CDs | Low | Very Low | 3.0% | ~1% | 1.5% | Negative |
| Savings Bonds | Medium | Very Low | 4.3% | ~2% | 2.5% | ~0% |
| Treasury Bills | High | Very Low | 4.5% | ~2% | 1.8% | Negative |
(Returns sourced from FDIC, U.S. Treasury, Bankrate, and Bureau of Labor Statistics CPI data. Individual results may vary. Past performance does not guarantee future results.)
What Works Best?
If you’d like help reviewing your short-term strategy or building a financial plan, contact us at Sculati Wealth Management. We’ll help you make informed decisions that align with your goals.