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Question 18

When planning for goals, distinguishing between short-, medium-, and long-term horizons clarifies which tools to use. Short-term goals (weeks to a few years) benefit from liquid, low-volatility accounts — high-yield savings, short-term CDs, or labeled subaccounts — because the priority is capital preservation and predictable timing. Medium-term goals (several years) might mix conservative bonds or laddered vehicles with higher-yield savings. Long-term goals (retirement, funding college decades away) benefit from market-exposed investments that compound over time. Financial advisors often recommend matching the investment vehicle’s risk profile to the time horizon: don’t stash retirement money in temporary cash, and don’t put an imminent down payment into a volatile stock portfolio. For budgeting, this means allocating surplus differently depending on the goal’s timeline and liquidity needs. Sinking funds and labeled accounts are techniques for short-term goals; automatic contributions to investment accounts fit long-term aims. The question asks you to choose the safest place to keep money earmarked for a major purchase planned within the next 12 months.

Where is the safest place to hold money you’ve earmarked for a planned major purchase happening within the next 12 months?

Did You Also Know...

By Wise Wallet

Buying mortgage points lowers your rate in exchange for an upfront cost, so you should only buy points if you’ll keep the loan long enough to break even.