Short Term Savings - Could I Be Doing Better?

[shanendoah]

Here's the deal, we currently have $7,300 sitting in savings accounts.
$1,000 of that is our instantly available EMERGENCY fund, with $500 earning 6.17%APY and the rest earning something abysmal- combined APY 3.23%
The other $6,300 is in a high interest savings account with 1.25%APY. We add $850 to this account the middle of every month.
$1,100 of that will go to paying taxes and another $2,000 will toward DH's spring quarter of college in March.

That leaves $3,200 that I don't have plans on needing for 6 months. Even if I wanted to keep an extra $1,000 on hand, just in case, I have $2,200 sitting around.
Last time we were in a position like this (2007) we were able to put some money in 3 and 6 month CDs and earn a pretty good APY. Now, though, to get a better APY than my savings account, I would need to put money in a 3 year CD, and that's not feasible.

This isn't investment money, its the money to pay for DH's school out of pocket (no new SLs), to fix the flooding in our basement, and someday make other home improvements, but even so, I'd like to see it working for us.

With CD rates so low, is the high yeild savings account the best bet for us? Or are there other short term (and I really do mean 3-6 months) savings vehicles that I could be looking in to?

[wodehouse]

I'm in the same boat, but with a lot more cash. Check out American Express savings bank (yes, the charge card company), they were paying 1.3% on savings (not the commitment of a CD), which seemed to be about the best in "high yield" accounts. I wouldn't trust any short term bond funds, too much risk of rates going up...and account value going down.

[hsclassic]

Consider a money-market account with a brokerage firm (e.g. Vanguard or Fidelity). Typically they pay higher rates than a bank MMA, plus with check-writing privileges, it makes it easy to pay for DH's school expenses without having to transfer money to your regular checking account.

[Lex Luthor]

Check out "High Yield Checking" Accounts. They have requirements about the number of transactions you need to have in a month (10-15) and usually require auto-deposits, though mine doesn't. Mine currently earns 3.2% and there is one other Credit Union in my area that has one for 3.4%. They have limits on the maximum amount they will pay on, mine is $30k, most seem to be around $20k.

I found mine, by using the website below and filtering on my state and then going to the websites for each bank listed. You can also try searching "High Yield Checking".

www.depositaccounts.com/checking/reward-checking-accounts.html