Imagine you have a small piggy bank where you put some of your pocket money. If you plan to use that money soon—maybe to buy a small toy—this is kind of like a short term investment. In grown-up words, short term investments are ways people put their money in something (like a special account or a small project) to earn a bit more money, but only for a little while. Then they take the money out to use it soon—sometimes in a few months or up to a year.
Why Do People Use Short Term Investments?
- Quick Access to Money: They don’t want to wait a long time, like many years, before they can use their money.
- Less Risky (Usually): They can take their money out faster if they need it.
- Small Goals: They might want to buy something soon—like a new phone or a small vacation—so they don’t want to lock up their money for a long time.
A Simple Example
Let’s pretend you have $10 that you want to use in a few months to buy a new coloring book. You put that $10 into a special piggy bank called “Short-Term Bank.” This piggy bank gives you a little extra candy (imagine candy as extra money) every month just for keeping your $10 there. After three months, you open the piggy bank and find:
- Your $10 is still there.
- You got a little extra candy (extra money) too!
Now you have enough to buy your coloring book sooner. That’s what grown-ups do with short term investments: they put money somewhere safe to get a little more back quickly.
Common Types of Short Term Investments (For Grown-Ups)
- Savings Accounts: Just like a piggy bank at the bank, but grown-ups earn a little extra money called “interest.”
- Certificates of Deposit (CDs): A special bank account where you keep your money for a certain number of months.
- Money Market Funds: Think of it like a big jar that holds money from many people, and tries to give everyone a little bit more back.
(These might sound fancy, but they work just like special piggy banks that pay you extra money for a short time!)
Key Takeaways
- Short Term Investments are like little piggy banks or special accounts that let you take your money out soon.
- You don’t have to wait many years, and you might earn a small bonus (like candy) on top of your saved money.
- They’re helpful if you have a quick goal—like buying a toy, a coloring book, or something grown-ups want (like a phone or a vacation).
Smart Saving Tips – FAQs
Q1: Can I lose money with these kinds of savings?
A: Usually, they’re pretty safe—especially things like savings accounts or CDs. But it’s still smart to read the rules carefully, just in case there are any surprises.
Q2: How long do people keep their money in these savings?
A: Most people leave it in for just a few months to about a year. It’s perfect when you know you’ll need the money soon, like for a gift, trip, or something fun.
