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Check out high-interest, low-penalty CDs
"Generally, any money earmarked for the short-term (one year or less) should be in a liquid position," says Gage DeYoung, a certified financial planner and founder of Prudent Wealthcare in the Denver area. "That being said, it is frustrating to get zero percent on cash."
And today's average CD rates are indeed depressing. They range from 0.13 percent annually on a three-month CD to 0.81 percent annually on a five-year CD, according to Bankrate.com's latest survey of banks and thrifts.
With the possibility of the Fed raising interest rates before the end of this year, you shouldn't lock in rates this low.
Instead, look for above-average interest rates and low early withdrawal penalties.
For example, Ally Bank offers no-penalty, 11-month CDs paying 0.87 percent APY.
If you have at least $1,000, you'll get a better yield -- 1.3 percent APY -- on a one-year CD from Triumph Savings Bank. It's based in Dallas, but anyone can open an FDIC-insured account online.
If you can withdraw your balance anytime without sacrificing much interest, you can move your balance to higher-paying CDs as rates climb. In the meantime, you've locked in a higher interest rate than you could have earned by keeping that money in a savings or money market account.
You could also create a short-term CD ladder to increase your returns, suggests DeYoung.
RATE SEARCH: Ready to purchase a CD? Search Bankrate.com for the top-paying certificates of deposit near you.