How to Earn 5% on Cash Safely in 2025: Best Options for Savers

Best Options for Savers

In 2025, the idea of earning 5% on your cash safely is no longer a fantasy or a fleeting promotion. After over a decade of ultra-low interest rates that punished savers and rewarded risk-takers, the economic landscape has shifted dramatically. The Federal Reserve’s aggressive tightening cycle from 2022 to 2024 in response to inflation has led to a persistently higher-rate environment. And while inflation has cooled, rates have remained elevated, providing a unique opportunity for investors and savers to earn meaningful yield on cash without stepping into risky territory. But the key is knowing where to look and how to optimize your returns without sacrificing liquidity, tax efficiency, or safety.

Let’s start with the obvious question: why does 5% matter? Earning 5% on cash in 2025 is significant because it exceeds the current rate of inflation, which has stabilized around 2.5–3%. That means you’re not just preserving purchasing power you’re actually growing it. In past years, cash often yielded less than inflation, resulting in negative real returns. Now, with Treasury bills, money market funds, and certain savings products yielding at or above 5%, the dynamic has changed. Conservative investors, retirees, and even institutions are now revisiting cash as a viable, income-producing asset class.

The safest and most tax-efficient way to earn 5% on cash in 2025 is through U.S. Treasury bills. Short-term T-bills specifically those with maturities of 4, 13, or 26 weeks are currently offering annualized yields between 5.0% and 5.3%. These instruments are backed by the full faith and credit of the U.S. government, making them virtually risk-free in credit terms. They’re also exempt from state and local income taxes, which is a major benefit for residents of high-tax states. You can purchase T-bills directly through TreasuryDirect.gov or via brokerage accounts at firms like Fidelity, Vanguard, or Schwab. Many investors use a laddering strategy staggering purchases at different maturities to maintain rolling liquidity while locking in high yields.

Money market funds (MMFs) are another powerful option. Unlike traditional savings accounts, MMFs invest in high-quality, short-term instruments such as T-bills, repurchase agreements, and commercial paper. In 2025, the 7-day SEC yields on leading MMFs are hovering around 4.8% to 5.1%. Providers like Vanguard, Fidelity, and Charles Schwab offer Treasury-only MMFs that are low-cost, highly liquid, and accessible via brokerage accounts. One key advantage is daily liquidity with no early withdrawal penalties you can access your cash whenever you need it. However, it’s important to note that MMFs are not FDIC-insured, though they are considered very low risk due to their structure and regulations.

Next up are high-yield savings accounts (HYSAs). Online banks like Ally, Marcus, and Discover are offering APYs around 4.5–5.0% in early 2025. These accounts are FDIC-insured up to $250,000 per depositor, per institution, and they allow for easy access to funds usually up to six withdrawals per month. The downside is that HYSA rates are variable, meaning they can decline if the Fed begins cutting rates later in the year. However, they remain an attractive option for emergency funds and cash you may need to tap into without hassle. Savers should consider diversifying across a few institutions to stay nimble and capture better promotional rates.

Certificates of Deposit (CDs) have also returned to relevance in 2025. Short-term CDs (3 to 12 months) are yielding between 5.0% and 5.5%, with some online banks offering promotional rates even higher. CDs offer fixed yields for a locked period, which is appealing for those looking to “set it and forget it”. The tradeoff is liquidity: most CDs charge early withdrawal penalties, which could negate interest gains. For investors who won’t need the funds during the CD term and especially those using CDs inside retirement accounts like IRAs this is a stable and straightforward choice. Note, however, that CD interest is fully taxable at federal and state levels, unlike Treasury interest.

A more flexible but slightly more complex route is through ultra-short bond ETFs such as JPST (JPMorgan Ultra-Short Income ETF) or ICSH (iShares Ultra-Short-Term Bond ETF). These funds invest in a mix of short-duration bonds and offer monthly income, with current yields in the 4.8–5.2% range. They come with minimal duration risk and are traded on major exchanges like stocks. While there is some credit risk involved, they are generally considered low volatility income vehicles, ideal for conservative investors looking to squeeze more out of their cash allocations without jumping into full-fledged bond portfolios.

Don’t overlook cash sweep programs at major brokerages, especially for those with significant cash balances. Firms like Schwab and Fidelity offer automated cash sweep into MMFs or government-backed accounts, allowing investors to earn 4.5%+ on idle funds while waiting to deploy capital. The key here is to opt out of default bank sweep options which often yield much less and manually select the highest-yielding sweep vehicle available on your platform.

One emerging option in 2025 is FDIC-insured cash management accounts offered by fintech platforms like Wealthfront, Betterment, and SoFi. These accounts spread deposits across multiple partner banks to extend FDIC coverage up to $2 million, while still offering 4.75–5.00% APY. For investors who want FDIC insurance + daily liquidity + high yield, these hybrid accounts are especially appealing. However, rates are still variable and subject to change with monetary policy shifts.

Of course, earning 5% safely isn’t just about selecting the right product it’s about strategic cash segmentation. Savvy investors in 2025 are segmenting their cash into buckets:

• Immediate needs (0–3 months) → HYSA or MMFs

• Short-term goals (3–12 months) → T-bills or CDs

• Low-risk income allocation → Ultra-short bond ETFs or laddered T-bills

By assigning purpose to each portion of cash, investors can optimize both yield and access.

Tax efficiency remains an essential part of the equation. Treasury interest avoids state taxes, while CD and HYSA income does not. Holding higher-yielding but taxable products inside tax-advantaged accounts (like IRAs) is one way to improve net returns. In taxable accounts, sticking to Treasury-backed instruments can significantly improve after-tax yield, especially for those in higher brackets.

In conclusion, earning 5% on cash safely in 2025 isn’t just possible it’s practical and widely accessible. Whether you're building an emergency fund, managing cash for retirement withdrawals, or just trying to stay ahead of inflation, today’s market offers multiple vehicles to help you do it without exposing yourself to unnecessary risk. The key is to be intentional. Compare rates, understand tax implications, and align your cash strategy with your broader financial goals. Because in 2025, cash is no longer just king it’s earning like one, too.