I'm new to US and its personal finance specifics. I have stable predictable income each month part of which (~$5k) I want to save. I'm not planning to use that money for the next 3-4 years. What are my low-risk options to grow the savings and protect it from inflation? Is a savings account in a bank my only simple option?

  • Is $5k how much you make a month, or how much you will save each month?
    – chepner
    Jan 13, 2018 at 14:29
  • that's how much i want to save each month Jan 14, 2018 at 7:40
  • What do you plan on using the money for in 3-4 years? This matters because what you do with your money should be closely tied to your finances. For example - if you are definitely, 100% going to buy a house in 3 years, that's not a lot of time for your finances to recover if the market crashes. Thus, you would want to keep a larger-than-normal portion of your investments as low risk. Jan 14, 2018 at 21:25

5 Answers 5


I'm not sure there are any low-risk options that would keep pace with inflation. However, a certificate of deposit (CD) would be a better option than a savings account, since you don't need ready access to the money.

With a savings account, you have a low interest rate (on the order of 0.1% these days), but you are more or less free to deposit or withdraw money at will.

With a CD, you deposit a fixed amount of money for an agreed term. The interest rate is higher, but you pay a penalty if you withdraw the money early. The interest rates typically increase with longer terms. The rates still aren't terrific; for example, a 48-month CD from my local bank only pays around 1.3%. However, you can shop around to find the best rate you can.

I might try something like the following: deposit your savings into a savings account, then every six months open a CD with accumulated savings. Starting Jan 1, you might open a 3-year CD in June, a 30-month CD in December, a 24-month CD in January 2019, etc. All your CDs would mature at once in June 2022.

Another plan would be to always open a 1-year CD every 6 months. This would give you less interest (since you have shorter-term CDs), but more flexibility as some of your CDs would mature every 6 months. Each time a CD matures, you would have the option of opening another CD with the money or putting it back into your savings account.

  • 1% interest on savings with nearly no account requirements or minimums is pretty common.
    – iheanyi
    Jan 15, 2018 at 15:43

Do you have emergency savings already? If not, I would put the monthly $5k into a high yield money market account with an online-focused bank (Ally, Capital One 360, GS Marcus, etc). These yield around 1.2% annually. Once you have ~ six months saved in this account (let's assume you spend $5k per month and save $5k per month, save up $30k in this account), then look at higher-yielding (and therefore riskier) assets.

I recommend opening a brokerage account with Betterment or Wealthfront and setting your risk tolerance to something around 70% stocks/30% bonds (adjust depending on your risk tolerance, adjust the stock allocation upward for more risk/reward and bonds upward for more lower risk/lower return.

If you are able to save that $5k per month for the next five years earning 5% annually, you'll have around $328k.

Also look into tax advantaged accounts with your employer (401k) or apart from your employer (IRA/Roth IRA) if you aren't already.


CDs from "online" banks currently (as of January 2018) pay about 1.3% interest on 12 month CDs and 1.2% on savings accounts (some more and some less). That's the only low-risk option, even though it will fall slightly behind inflation

Some examples are:

  • Ally Bank
  • Capital One 360
  • Synchrony
  • GS Bank

These are real, government-insured banks that have brick-and-mortar branches but focus on web customers.


The safest options would be savings accounts or bonds.

However a good recommendation to save wisely and get some risk free returns (including risk from inflation) over savings/bonds is this: Why don't you try managed portfolio plans offered by top firms like Fidelity, Merryl Lynch, Schab and others? Just clearly state your objective to the managers. Letting professionals take care of your investments for specific objectives is probably more efficient.


Mutual fund companies, such as Vanguard & T. Rowe Price (and many others) have a wide range of funds which can be grouped by their risk. For low risk options, you'd probably want to look at ones that mainly invest in money market and bonds.

PS: It should be pointed out that the zero-risk options mentioned, like savings accounts and CDs, currently guarantee that you'll lose some value due to inflation, while a moderate risk mix of stocks, bonds, and money-market investments will almost certainly show a profit. The risk isn't one of total loss*, but of having to wait out an economic downturn instead of being certain of getting your money out in 4 years.

*Bar an apocalyptic-level economic meltdown, in which case we'll all have other things to worry about :-)

  • According to OP, he'll be using that money in "the next 3-4 years". Even bonds dropped 20-30% in 2007/8 (but they bounced back within 2 years.
    – RonJohn
    Jan 14, 2018 at 20:22

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