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Money earmarked for a planned major purchase within the next 12 months should be held in a liquid, low-volatility vehicle such as a high-yield savings account or an FDIC-insured money market account. The primary goals for 12-month funds are capital preservation and liquidity: you need the cash when the purchase occurs and cannot reliably accept market drawdowns. High-yield savings accounts and short-term money-market accounts offer easy access, usually a competitive yield relative to traditional savings, and minimal principal risk.
Alternatives like short-term CDs can be considered if the timing aligns exactly (and you’re comfortable with potential penalties for early withdrawal). For very short horizons under a year, avoid stock or long-duration bond investments because market volatility could reduce principal at the worst time. Maintain clear labeling (a subaccount or separate account name) so the funds aren’t accidentally spent, and automate contributions to build the target over time. Review rates periodically: when yields on safe cash vehicles rise, the relative opportunity cost of holding short-term cash decreases, but the primary concern for 12-month goals remains safety and access.
By Quiz Coins
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