Short- and medium-term goals are those that happen within 10 years. Your main concerns for that time frame are:

• safety
• liquidity (the ability to turn your investment into cash quickly without penalty)
• return (the amount of money your money will earn)

Safety is a key concern
The time horizon for short- and medium-term savings is shorter than the safe period for investing in the stock market. Therefore, you should keep your savings in risk-free investments, such as

• insured deposit accounts*
Savings Accounts
Certificates of Deposit
• U.S. government obligations.
Series EE
Series I Savings Bonds

*  Insured deposit accounts refers to those that are insured by the Federal Deposit Insurance Corporation (FDIC).  The FDIC is an independent agency of the United States government.  The FDIC protects you against the loss of your deposits if an FDIC-insured bank or savings association fails.  FDIC insurance is backed by the full faith and credit of the United States government.  The basic insurance amount is $100,000 per depositor per insured bank (retirement plans, for example individual retirement accounts, that are sold through the bank are insured up to $250,000).  To check whether your bank or savings association is insured by FDIC, call toll-free 1-877-275-3342 or use "Bank Find" at www.fdic.gov/deposit/index.html.

Liquidity means quick cash
Liquidity refers to how quickly you can turn your investment into cash. Savings accounts are the most liquid. Insured market-rate accounts limit the number of withdrawals you can take in a given time period, so they are less liquid. Certificates of deposit may be withdrawn at any time, but there is a big interest penalty for cashing in CDs before they are due. U.S. Savings Bonds cannot be cashed in for one year after purchase, and they should be held for at least five years.

The returns you earn on deposits and Savings Bonds are lower than the average returns on stocks because you don't have as much risk. The longer you tie up your money (and sacrifice some liquidity), the more you are rewarded with a higher return.