Cash and Cash Equivalents
Cash equivalents are safe, short-term, highly liquid investments that are, as the name suggests, equivalents to cash.
Cash equivalents are excellent savings vehicles for short-term goals. Here are a few examples:
- Money market funds. Technically a mutual fund, money market funds strive to maintain a share price of $1 and usually provide higher interest than typical savings accounts.
- Certificates of deposit (CDs). Also referred to as time accounts, CDs provide a “locked” amount of interest for a specified period of time. They are also FDIC insured.