30 Day Investing Challenge, Day 11: Best Accounts For Medium Term Goals
A lot of times experts lump medium-term goals into either short term or long term goals, but I think there’s more nuance than that. Medium term goals are usually accomplished in a 3-10 year timeframe and require a mix of assets that allow for some growth while protecting your principle. If a goal is 3+ years out, it’s good to know the kind of accounts that best support this timeline. Most of the short term goal accounts will work here (plus I’ll recommend a bonus account at the end), but my timeline recommendations are different. Let me explain:
High Yield Savings Account
You can use this kind of account for medium term goals, but I don’t recommend using it for anything over 5 years. At that point your money’s purchasing power will be depleted and there are plenty of other places to put your money that will help stave off inflation. My recommendation: only use this account for goals 3-5 years long.
Certificate of Deposit
Did you know they make long term CDs? Yep, they usually start at 3 months but can go up to 5 years (some institutions even have 10 year CDs, though I don’t recommend those). Rates as of April 2024 for CDs are in the low 5%’s. With the possibility of the Fed lowering interest rates soon, I’d get in on this action.
I’m sure you remember in your last challenge that you need the amount you’re going to deposit up front and can’t add to CDs over time. So if you’ve been saving for a medium term goal in a high yield savings account that gets less than 5%, I recommend putting that balance into a CD with a term that matches your goal timeline. Then continue adding money to a high yield savings account as well. This way you lock in the high interest rate, but also keep adding onto your goal.
Brokerage Account
These accounts really are the jack of all trades when it comes to saving and investing. You can open this account and invest in almost anything, including bond index funds that are perfect for medium term goals. If your timeline is 5+ years out I would open this kind of account.
TreasuryDirect.gov
TreasuryDirect.gov is the only place to buy and sell U.S. Savings Bonds directly online. The reason I suggest it for medium term goals is because of the types of investments you can buy in this account, namely I Bonds and TIPS (Treasury Inflation-Protected Securities). I’ll get into these two types of investments in another challenge, but just know they’re perfect if your goal is 5-10 years out.
Action Step: Open Your Account (if you don’t have one yet)
If you already have one of these accounts and it works well with the medium term goals you set, awesome! If you haven’t, go ahead and open the account now:
For the best High Yield Savings Account check out this article by NerdWallet.
For the best CD check out this article by Bankrate.
For the best brokerage account, consult day 9’s challenge.
You can go to TreasuryDirect.gov to open an account directly.
Check back in tomorrow for your next challenge: the best accounts for long term goals.
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