Find a More Rewarding Parking Spot for Your Short-Term Savings

A piggy bank is a fine place to toss that spare change jangling at the bottom of your purse. But for any amount more substantial, think about getting a little something back.

Of course you know that stashing your rainy-day money in a mattress cheats you out of any chance to earn interest on your dough. However, settling for a checking-account interest rate that starts with a decimal point is just as pointless. Even on the smallest balances, you can do better. This month, vow to find a better parking spot for your money.

Rates and special deals change frequently, so here are some guidelines on finding the right kind of account, depending on when you need to get your mitts on your money.

Everyday spending money

High-yield savings and checking accounts are an ideal place to park money for your monthly bills. They offer flexibility (you can add or withdraw funds at any time) and liquidity (your dough isn't locked in for a specific time period). Some even boast interest rates on par with short-term CDs. The best rates by far are offered by online-only banks, which keep costs low by cutting back on frills. (Most transactions will be done online, and the account may only be a place to park cash, not manage bills.) You will need to keep your oldfangled bank account open to transfer money back and forth.

Drawbacks: Bare-bones banks with no ATM/debit access or check-writing privileges can be a big hassle if you need your cash fast. Customers must coordinate their cash flow by transferring money back and forth from the online bank to a linked checking/savings or brokerage account. That means delays -- two to five days -- before everything's reconciled. Also, watch out for limited-time teaser rates by researching the product's six-month interest rate history.

Infrequently accessed cash

For money earmarked for irregular expenses, or a place to park a windfall for a short while, money market accounts and money market funds are the perfect piggy banks. The interest rates are better than those of a savings account. And if the money isn't mingling with your everyday dough, you'll be less apt to spend it.

First, decide between a money market account (MMA) or a fund (MMF). The former is a banking product; the latter comes from a mutual fund company. What's the difference? First, MMFs are not FDIC-insured. You're unlikely to lose your money, but it can happen. Second, the fees can fleece you. Most MMFs have expense ratios of less than 1%, but many fund families have slowly been inching up their fees. Plus, if you buy through your brokerage account, factor in those transaction costs, too. If taxes are an issue, a tax-free MMF may be your best bet. Despite their typically lower yields, your eventual return can be competitive with both taxable MMFs and MMAs.

Drawbacks: Less nimble than checking accounts, many money market products limit transactions (typically six or fewer withdrawals per month), and the penalty fees can be brutal. Also, some online deals require customers to open a checking or savings account with that institution to avoid fees.

Money you don't need for a while

Saving up for a renovation? Certificates of Deposit (CDs) are time-based investments (anywhere from a month to several years) that guarantee your principal while providing a fixed amount of interest.

Drawbacks: Commitment-phobes beware! You're not only locking in your loot, but also your interest rate. Also, should you unexpectedly need your cash, the penalties for early access (in interest and even the principal) will break your heart. You can limit the downside by choosing a shorter-term CD, then rolling your money into another once it matures.

Motley Fool writer Dayana Yochim views the "take a penny, leave a penny" bowl as a privilege, not a right. Over at her Motley Fool Green Light service (www.GreenLight.fool.com) the money and investing tip jar overfloweth.