4 places to keep your cash as the Federal Reserve weighs a policy shift

The top 1% of savings accounts has an average 4.69% rate, according to DepositAccounts.com. But only 22% of investors are earning 3% or more on their cash, according to a Bankrate survey conducted earlier this year. 

High-yield savings accounts, with easy access to your funds, are worth considering, said Ken Tumin, founder and editor at DepositAccounts.com. 

They’re also safe places to keep your cash. Most savings accounts are covered by the Federal Deposit Insurance Corporation, which generally offers depositors $250,000 of coverage per bank, per account type.

While investors expect the Federal Reserve to start cutting interest rates next year, online savings account rates won’t fall significantly until the policy shifts, he added. 

Certificates of deposit — often called CDs — guarantee a set interest rate for a specific period of time, which “can be a good option,” said Tumin. 

Whether an investor decides to go for an online bank, local credit unions or bigger banks, they can get significantly competitive rates. 

The top 1% average for one-year CDs can be as high as 5.55% as of Aug. 18, according to DepositAccounts.com. 

Rates are also typically “locked in,” meaning even if interest rates begin to go down, your investments will keep growing at the same rate until maturity. 

Amid rising interest rates, Treasury bills have also become a competitive option for cash, with yields well above 5%, as of Aug. 18. Backed by the U.S. government, Treasury bills are considered “very safe,” according to Tumin, with terms ranging from one month to one year. 

You can buy Treasury bills, or “T-bills,” through TreasuryDirect, a website managed by the U.S. Department of the Treasury, or through a brokerage account. 

One of the perks of buying through a brokerage account is more liquidity, meaning you can access the money faster if needed. The trade-off is you’ll earn a slightly lower yield compared with that of T-bills purchased through TreasuryDirect.

Another option to consider is short-term money market funds, said certified financial planner Chris Mellone, partner at VLP Financial Advisors in Vienna, Virginia. 

Money market mutual funds — which are different from money market deposit accounts — typically invest in shorter-term, lower-credit-risk debt, such as Treasury bills.

Yields are closely tied to the federal funds rate and some of the biggest money market funds are paying north of 5%, as of Aug. 18, according to Crane Data. 

With more interest rate hikes still possible from the Fed, Mellone currently prefers short-term money market funds over CDs for higher rates and more flexibility. “It’s really the best of both worlds,” he said.

However, there are a couple of downsides. Although money market funds aren’t likely to lose value, declines have happened, and investors should know there’s no FDIC protection.

For more on savings accounts, check out CNBC Select’s recent ranking on the best high-yield savings accounts.