What type of account is typically used to save for short-term goals?

A money market account is typically used to save for short-term goals because it offers liquidity, which means that funds can be accessed easily without significant penalties or delays. These accounts often provide a higher interest rate compared to traditional savings accounts while still allowing for quick withdrawals. This makes them suitable for individuals looking to save for expenses or goals that will arise within a few months to a couple of years, such as buying a car, going on a vacation, or establishing an emergency fund.

In contrast, retirement accounts are designed for long-term savings and come with restrictions regarding early withdrawals, making them less suitable for short-term goals. Trust funds are generally used for managing and distributing assets over longer timeframes, often for the benefit of beneficiaries who may not need immediate access to the funds. Certificates of deposit (CDs) are time deposits that typically penalize early withdrawal, which limits their flexibility for short-term needs, as they require funds to be locked in for a specified term.