You’ve Got 5% on Savings—Now What? Best Places to Invest in February 2026

Disclosure: We independently evaluate all financial products and platforms mentioned. Some links may be affiliate links — if you open an account through our links, we may earn a referral fee at no additional cost to you. Our editorial recommendations are not influenced by compensation. Investment risk disclosure: All investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. High-yield savings accounts and CDs are FDIC-insured up to $250,000; investments in ETFs, private credit, and equities are not FDIC-insured and may lose value. This article is for informational purposes only and does not constitute investment advice. Consult a licensed financial advisor before making investment decisions. Data as of February 10, 2026.

Reviewed by: Patricia M. Holbrook, CFA, CFP® — 16 years as a portfolio strategist and financial planner at a registered investment advisory firm, specializing in fixed income, tax-efficient investing, and high-net-worth allocation strategies. Full bio →

American households currently hold an estimated $6.4 trillion in savings accounts and money market deposits, according to Federal Reserve Flow of Funds data. A meaningful portion of that sits in high-yield savings accounts (HYSAs) earning 4%–5% APY — rates that felt extraordinary after years near zero. But here is the problem most financial media is not stating plainly enough: those rates have a shelf life.

The Federal Reserve held rates steady in January 2026 after cutting three times in late 2024. Wall Street consensus now places the first 2026 cut in mid-year, with the Fed’s own median projection showing just one quarter-point reduction by year-end. That means your 5% HYSA will likely pay 4.50% — or less — by Q3 2026. If you have already built your emergency fund, the question every financially rational person should be asking right now is: where does the next dollar go?

This guide answers that question with specificity. We compare nine investment vehicles by rate, risk, liquidity, and tax treatment — ranked for investors who are ready to move beyond the savings account but want to understand exactly what they are buying before they move a dollar.

At-a-Glance: Best Places for Your Money Beyond Savings — February 2026

*Early withdrawal penalties apply to most CDs. †I Bonds: 3-month interest penalty if redeemed before 5 years. *S&P 500 returns are historical average (1957–2025); future returns are not guaranteed and can include years of significant losses.

Quick Verdict: Which Option Is Right for You?

• Maximize your 5% window NOW (0–12 months): Lock into a 12–24 month CD at 4.50%–5.11% APY before rates fall further. Daniels-Sheridan Federal Credit Union currently offers 5.11% APY on a 1-year CD with a $500 minimum.
• Keep cash accessible while earning above-average yield: Treasury bills via TreasuryDirect.gov yield 4.25%–4.91% with no state income tax, full government backing, and weekly liquidity. Better than most money market funds with a better tax profile.
• 3–7 year time horizon, want income: Private credit funds (BDCs) and dividend ETFs offer 4%–11% yields but carry market and credit risk. Not FDIC-insured. Appropriate for money you will not need in the near term.
• 10+ year time horizon: The S&P 500 has returned approximately 10% annually on average since 1957. No savings account rate, however attractive, compounds meaningfully over 20 years relative to broad equity ownership. Time in the market is your single greatest asset.
• Inflation hedge with safety: I Bonds and TIPS protect against inflation. I Bonds currently yield 4.03% (fixed + inflation component). TIPS adjust principal with CPI. Both are U.S. government-backed.

Methodology: How We Evaluated These Options

Each option in this guide was evaluated using five criteria:

1. Current rate accuracy: All rates sourced from primary sources — TreasuryDirect.gov, FDIC.gov, Bankrate, and direct institution websites — as of February 10, 2026. Rates change; verify before opening an account.
2. Risk-adjusted return: We compare yields in context of the risk required to achieve them. A 4% government-backed return is not comparable to a 4% private credit return — the latter carries credit and liquidity risk.
3. Liquidity and penalty assessment: We explicitly document lockup periods, early withdrawal penalties, and auction schedules so you can match each vehicle to your actual cash timeline.
4. Tax efficiency: Federal and state tax treatment can meaningfully affect after-tax yield. We flag vehicles with state-tax exemptions (Treasury securities) and tax-deferred growth options.
5. Accessibility: We prioritize options available to any U.S. investor with a standard brokerage or bank account, with minimum investments low enough for the average saver.

Primary sources: U.S. Department of the Treasury, Federal Reserve Selected Interest Rates, FDIC, Bankrate, and Investopedia.

The Clock on 5%: Understanding Why You Need to Act Now

Before diving into specific vehicles, it is important to understand the interest rate environment that shapes every choice in this guide. The Federal Reserve cut its benchmark federal funds rate three times in late 2024 — a total of 75 basis points — before pausing in January 2026. As of February 2026, the federal funds rate sits in the 4.25%–4.50% target range.

The Fed’s own median projection — the so-called “dot plot” released at the December 2025 FOMC meeting — shows only one quarter-point cut in 2026, bringing the rate to approximately 4.00%. Wall Street brokerages (Goldman Sachs, Bank of America, Deutsche Bank) expect the first cut in June 2026. J.P. Morgan’s chief economist, notably, projects zero cuts in 2026, citing sticky core PCE inflation at 2.8% and stronger-than-expected employment growth in early 2026.

What does this mean practically? The spread between your HYSA’s rate and actual Fed policy is compressing. Banks set HYSA rates based on the fed funds rate; when the Fed cuts, banks cut HYSA rates within days. If you have emergency-fund money earning 5% that you do not need for 12–24 months, right now — February 2026 — is the last window to lock in that rate on a CD before banks reprice lower.

The rate environment in one sentence: Savings account rates will almost certainly be lower by late 2026. CDs let you lock today’s rates. Treasury bills give you government-backed yields with state-tax advantages. And if you have money you won’t touch for 10 years, no rate environment changes the math on long-term equity compounding.

Option 1: Certificates of Deposit (CDs) — Lock In Before Rates Fall

What They Are

A Certificate of Deposit is a time deposit offered by banks and credit unions. You deposit a lump sum for a fixed term — 3 months to 5 years — and receive a guaranteed, FDIC-insured interest rate for that entire period. Unlike a savings account, your rate does not change if the Fed cuts. That rate-lock feature is the entire value proposition in February 2026.

Best CD Rates Available Right Now (February 2026)

Sources: GoBankingRates, WSJ, Investopedia, as of February 10, 2026. Rates subject to change; verify directly with institution before opening an account.

The CD Ladder Strategy: Getting the Best of Both Worlds

The most common mistake with CDs is locking all your money into one term. If rates rise, you are stuck. If rates fall, your locked rate is great — but you have no flexibility. The solution used by savvy savers is a CD ladder: divide your investable cash across multiple CDs with staggered maturities.

Example: $20,000 CD Ladder for February 2026

*No early withdrawal penalty — optimal for the 6-month rung if you want flexibility. Every 3 months, one CD matures; reinvest at whatever rate is best at that time, or use the cash if needed.

This ladder gives you access to $5,000 every 3 months, eliminates the risk of being fully locked up, and averages approximately 4.43% APY across the portfolio — significantly higher than any savings account you can open today with similar safety.

The No-Penalty CD: Your Best Friend in an Uncertain Rate Environment

For investors who are nervous about commitment, no-penalty CDs (also called “liquid CDs”) offer the best of both worlds: a fixed rate higher than most savings accounts, with no early withdrawal penalty after a brief initial holding period (typically 6–7 days). Climate First Bank’s 4.27% APY 6-month no-penalty CD is the standout option in February 2026. If rates rise meaningfully, you can exit and reinvest at no cost.

Option 2: Treasury Bills — The Overlooked Tax Advantage

What They Are

Treasury bills (T-bills) are short-term debt instruments issued by the U.S. federal government with maturities of 4, 8, 13, 17, 26, and 52 weeks. They are backed by the full faith and credit of the United States — the same backing behind your dollar bills — and are considered the safest investment on earth from a default-risk perspective. Current yields range from 4.25% to 4.91% depending on term, as of February 10, 2026 (U.S. Treasury daily rates).

The State Tax Advantage Most Investors Miss

Here is the feature that should make every investor in a high-income-tax state pay close attention: Treasury bill interest is exempt from state and local income taxes. If you live in California (top marginal rate: 13.3%), New York City (combined rate: ~12.7%), or New Jersey (10.75%), this exemption is worth real money.

After-tax comparison for a California investor in the 32% federal bracket:

Illustrative example. Tax situations vary; consult a CPA for your specific situation. Federal tax applies to all three options at your marginal rate.

In practical terms: a California investor comparing a 4.60% HYSA with a 4.75% T-bill needs to account for the 13.3% state tax on the HYSA interest. After state tax, the T-bill’s effective yield advantage in California can be 0.50%–0.75% annually — on $50,000, that is $250–$375 per year for doing nothing more than buying T-bills instead of a savings account.

How to Buy T-Bills

You can purchase Treasury bills through TreasuryDirect.gov (direct from the government, no brokerage fee, minimum $100), or through your brokerage account (Fidelity, Schwab, or Vanguard all offer T-bill auctions at no transaction cost). TreasuryDirect auctions happen weekly; you set a competitive or non-competitive bid and receive the market clearing rate.

Option 3: Series I Savings Bonds — The Inflation Anchor

What They Are and the Current Rate

Series I bonds (“I bonds”) are U.S. government savings bonds whose interest rate adjusts every six months based on the Consumer Price Index for All Urban Consumers (CPI-U). The current composite rate for bonds issued November 2025 through April 2026 is 4.03%, composed of a fixed rate of 0.90% (the best fixed component since 2007) and an inflation component of 1.56% semiannual (3.12% annualized).

The 0.90% fixed rate is significant: it means that for the life of the bond (up to 30 years), you will always earn at least 0.90% above inflation. That is a genuine real return — something almost no bank account can offer over the long term.

Key Rules Every Investor Must Understand

When I Bonds Make Sense (and When They Don’t)

Best for: Investors with cash they won’t need for at least 5 years, who want inflation protection and can work within the $10,000 annual limit. The deferred federal tax is an additional advantage if you expect to be in a lower bracket at redemption.

Not ideal for: Emergency funds (12-month lockup), short-term savings goals, or large lump sums (the $10K annual limit is binding).

Option 4: Money Market Funds — The Brokerage Cash Alternative

What They Are

Money market funds (MMFs) are mutual funds that invest in ultra-short-term, high-credit-quality debt instruments: Treasury bills, government agency securities, and commercial paper. They are designed to maintain a stable $1 net asset value (NAV) — though unlike bank accounts, they are not FDIC-insured (they are covered by SIPC up to $500,000, which protects against brokerage failure, not investment losses).

Current Yields at the Big Three Brokerages

*Invesco rate is for institutional shares; retail access may vary. Sources: Investopedia, My Money Blog, February 2026.

Money Market Funds vs. High-Yield Savings: The Honest Comparison

The straightforward reality: top HYSA rates (4.60%–5.00%) currently beat the best brokerage money market funds (4.20%) by 40–80 basis points. For most investors, the right move is to keep cash in a high-yield savings account — not a brokerage money market fund — for the highest insured yield on idle cash.

Money market funds make sense when: (a) the convenience of keeping funds in your brokerage account outweighs the yield difference, (b) you are actively trading and need immediate settlement capability, or (c) you have balances above $250,000 that exceed FDIC insurance limits (money market funds at Vanguard offer Treasury-only options with government backing).

Option 5: Private Credit — The 8%–11% Alternative Going Mainstream

The Retailization of Private Markets

Private credit — lending directly to private companies, real estate developers, and infrastructure projects outside of traditional bank channels — has historically generated returns of 8%–12% annually, with lower volatility than public equities and low correlation to stock market swings. It was once accessible only to institutional investors and ultra-high-net-worth individuals with $1 million or more to invest.

That is changing rapidly. What HedgeCo.net’s January 2026 analysis calls “the defining investment story of the decade” is the “retailization” of private markets — major asset managers slashing minimum investment thresholds and creating evergreen fund structures that offer quarterly or monthly liquidity windows instead of traditional 10-year lockups.

Key data points on the market shift:

• Blackstone expects to grow its retail capital allocation from $200 billion to $500 billion. Its retail-accessible Private Credit Fund (BCRED) holds $82.2 billion in investments and has generated annualized net returns of 8.2%–9.9%.
• Apollo Global Management is targeting $50 billion in retail capital through 2026.
• KKR anticipates that half of all new capital raised will come from private wealth channels — not institutional investors.
• Investment minimums have dropped from $5 million+ to as low as $2,500 for certain retail products.
• By 2025, high-net-worth individuals held $1.2 trillion in private equity — a 2.4x increase from 2020 (JPMorgan, 2025).

Key Private Credit Vehicles Available to Retail Investors

What Are the Risks? (Read This Section Carefully)

Private credit’s higher yields come with risks that savings accounts and Treasury bills do not carry:

• Credit risk: The private companies you are lending to may default. While loss rates in private credit have historically been lower than high-yield bonds (1%–2% annually vs. 3%–4%), they are not zero.
• Liquidity risk: Even “liquid” private credit structures offer only quarterly redemption windows, and in a market stress scenario, managers may suspend redemptions entirely (as some non-traded REITs did in 2022–2023).
• Valuation opacity: Private assets are marked-to-model, not market-to-market. This can mask losses temporarily and makes comparisons with public markets difficult.
• Fee drag: Management fees of 1.0%–1.5% plus performance fees of 10%–15% of profits above hurdle rates meaningfully reduce net returns. Always evaluate net-of-fee returns.
• Not FDIC-insured: Unlike your savings account or CD, principal is not protected.

Who should consider private credit: Investors with a 3+ year time horizon, who have already built a solid emergency fund and CD ladder, and who can tolerate the illiquidity of quarterly redemption windows in exchange for materially higher yields. Allocating 5%–15% of a long-term portfolio to private credit is a mainstream institutional practice; it is only recently becoming accessible at scale for individuals.

Option 6: Dividend ETFs — Income Plus Growth Potential

The Case for Dividend Investing in 2026

Dividend-paying stocks and dividend ETFs occupy a unique middle ground: they generate regular income (yield) like a bond or savings account, but their underlying value can grow over time like equities — and their dividend payments can increase year after year, unlike a fixed CD rate. According to Morningstar’s February 2026 analysis, dividend stocks outperformed the broad market in 2025, driven by rotation out of technology growth into income-generating sectors as rates stabilized.

Top Dividend ETFs to Consider

Sources: Morningstar, ETF.com, as of February 2026. Past performance does not guarantee future results. Returns include reinvested dividends.

SCHD (Schwab US Dividend Equity ETF) is the standout for investors transitioning from savings accounts: its 3.7% yield is competitive with some CD rates, it has a rock-bottom 0.06% expense ratio, and its underlying holdings are high-quality, financially stable U.S. companies that have consistently grown their dividends. Unlike a CD, the dividend can grow over time — SCHD’s 10-year dividend growth rate is approximately 12% annually.

The critical difference from savings accounts: Dividend ETFs are not FDIC-insured. The underlying stock prices fluctuate with market conditions. In 2022, SCHD fell approximately 3.2% while the S&P 500 fell 18.1% — a meaningful buffer, but not zero risk. Dividend ETFs are appropriate for money you genuinely will not need for 3–5 years minimum.

Option 7: S&P 500 Index Funds — The Long Game

Why the S&P 500 Belongs in Every Long-Horizon Portfolio

No savings account, CD, or bond has matched the long-term compounding power of broad U.S. equity index funds. The S&P 500 has returned approximately 10% annually on average since 1957 — through recessions, oil crises, dot-com bubbles, the 2008 financial crisis, and a global pandemic. That 10% average includes years of -38% (2008) and +32% (2013). The volatility is real. So is the long-term compounding.

The math is straightforward: $10,000 earning 4.5% annually (a good CD rate) grows to approximately $55,000 over 30 years. The same $10,000 earning 10% annually grows to approximately $174,000. The difference — $119,000 on a $10,000 investment — is why financial advisors consistently recommend that money with a 10+ year time horizon belongs in broad equity index funds, not savings accounts.

Best S&P 500 ETFs for February 2026

Sources: ETF.com, Morningstar, fund prospectuses. 5-year returns as of January 2026. Past performance does not guarantee future results.

For most investors, the choice between VOO, IVV, and FXAIX is largely irrelevant — they are virtually identical products tracking the same index with expense ratios at or near 0.03%. The most important decision is simply starting: opening an account, setting up automatic contributions, and staying invested through volatility.

Building Your Transition Portfolio: A Practical Allocation Framework

The question “where do I invest beyond my savings account?” rarely has a single right answer — it depends on your time horizon, tax situation, risk tolerance, and whether you have competing financial priorities (high-interest debt, underfunded retirement accounts, near-term expenses). Below are three archetypal investor profiles with suggested allocation frameworks:

Profile A: The Cautious Saver (Time Horizon: 0–3 Years)

Primary goal is capital preservation with yield optimization. Not comfortable with market volatility. Possible near-term expenses (home purchase, tuition, car).

Expected blended yield: ~4.40%–4.75% APY, fully capital-safe, FDIC/government backed.

Profile B: The Balanced Investor (Time Horizon: 3–10 Years)

Comfortable with moderate volatility. Retirement contribution maximized. Looking to grow wealth beyond safe-rate returns without going fully into equities.

Expected blended return: ~7%–8% annually over a full market cycle (not guaranteed; includes market risk).

Profile C: The Long-Horizon Investor (Time Horizon: 10+ Years)

Time is the most powerful asset. Maximum exposure to long-term compounding, with a small safety buffer.

Expected long-term average: ~9%–10% annually (S&P 500 historical average; not guaranteed).

Tax-Advantaged Accounts: Double the Impact of Every Dollar

Before investing a single dollar in a taxable account, ensure you have maximized your tax-advantaged options. In 2026, contribution limits are:

*Combined IRA limit for all IRAs. †Roth IRA income phase-out: $150,000–$165,000 (single), $236,000–$246,000 (married filing jointly) for 2026. Sources: IRS, 2026 inflation adjustments.

A 401(k) earning 10% annually is worth more than a taxable account earning 10% because every year of tax-deferred compounding saves you the taxes that would otherwise reduce your reinvestment base. Always exhaust your employer 401(k) match before investing in taxable accounts — the match is an immediate 50%–100% return on that portion of your contribution.

Frequently Asked Questions

Is my money safe in a high-yield savings account in 2026?
Yes, provided the institution is FDIC-insured (banks) or NCUA-insured (credit unions), up to $250,000 per depositor, per institution, per ownership category. You can verify FDIC coverage at BankFind.FDIC.gov. Some of the highest-rate online banks (Varo, Pibank) are FDIC-insured — confirm before depositing. Balances above $250,000 can be protected by spreading funds across multiple institutions or using different ownership categories (individual, joint, IRA).

Should I pay off debt before investing beyond savings?
The mathematical threshold is your interest rate. If your debt carries an interest rate above your expected investment return, pay it off first. In practical terms: credit card debt at 20%+ APR should always be eliminated before any investment outside of a 401(k) match. Student loans at 5%–7% are a judgment call based on your tax deductibility and psychological preference. Auto loans at 3%–4% are generally fine to maintain while investing, since a diversified portfolio is likely to outperform that rate over a 5+ year horizon.

What is the difference between a money market fund and a money market account?
A money market account is a bank deposit account — FDIC-insured, offered by banks and credit unions. A money market fund is a mutual fund — not FDIC-insured, offered by investment companies. Both aim to maintain a stable $1 value, but they are structurally different products with different regulatory frameworks. In February 2026, the best high-yield savings accounts are paying more than most money market funds, making the distinction more relevant than usual.

Can I lose money in a CD?
You cannot lose principal in an FDIC-insured CD if you hold it to maturity. However: (1) early withdrawal penalties can eat into principal on some CDs if you exit before the term ends — always confirm the penalty before opening; (2) “brokered CDs” purchased through a brokerage can be sold before maturity on the secondary market, where prices fluctuate with interest rates and you could receive less than face value; and (3) inflation risk is real — if your CD earns 4.15% and inflation runs at 4.5%, your real purchasing power declines. No-penalty CDs eliminate the early withdrawal risk.

What is private credit, and is it appropriate for average investors?
Private credit means lending money to private companies or real estate projects — outside the public bond markets — in exchange for higher interest yields. It is appropriate for investors who: (a) have a fully funded emergency fund and no high-interest debt, (b) have a 3+ year time horizon, (c) can tolerate the illiquidity of quarterly redemption windows, and (d) understand that higher yield means higher risk. Publicly traded BDCs (ARCC, OBDC) are the most accessible starting point — they trade on stock exchanges, have daily liquidity, and let you invest with as little as one share. Non-traded BDCs and interval funds offer potentially higher yields but less flexibility.

Bottom Line: Build a Ladder, Not a Single Bet

February 2026 is a genuinely interesting moment in the interest rate cycle: savings rates are still high by historical standards, but their shelf life is limited. Every option in this guide serves a purpose — the question is matching the right vehicle to your specific time horizon, tax situation, and risk tolerance.

The four-step framework for moving beyond your savings account:

1. Secure your foundation: Keep 3–6 months of expenses in an FDIC-insured HYSA or T-bill ladder. Do not invest your emergency fund.
2. Lock in current rates: Move any money you won’t need for 12–24 months into a CD ladder or T-bills now. These rates will be lower by late 2026.
3. Add income with moderate risk: Dividend ETFs and publicly traded BDCs (for 3–5+ year money) offer 3%–10% yields with daily liquidity — above savings account rates with more growth potential.
4. Let long-term money compound in equities: Every dollar with a 10+ year horizon belongs in a low-cost S&P 500 index fund. No CD rate, however attractive today, replicates 40 years of equity compounding.

Act now on CDs and T-bills. The rate environment will not stay here indefinitely. The window to lock in 4.5%–5.1% on FDIC-insured deposits — with zero risk — may close by mid-2026.

Start here:
→ TreasuryDirect.gov — Buy T-bills and I Bonds directly from the U.S. government
→ Bankrate Best CD Rates — Compare FDIC-insured CD rates updated daily
→ Vanguard VOO — S&P 500 index fund at 0.03% expense ratio
→ Schwab BDC Research — Screen publicly traded business development companies

Investment risk disclosure: This article is for informational purposes only. All figures cited are as of February 10, 2026 and subject to change. FDIC insurance limits apply to bank deposits; ETF, private credit, and stock investments are not FDIC-insured and can lose value. Past performance does not guarantee future results. Consult a licensed financial advisor, CPA, or registered investment advisor before making investment decisions.

Author: Rhadamanthys