The amount you stash away in safe, liquid investments is ultimately a personal decision. How much you decide to put away depends on some of the following guidelines.

Your willingness to take a risk

Some people are comfortable with a one year worth of planned major expenses in a safe stable account. Other people are more conservative taking a three year view. Risk tolerant investors may put more of their faith in the stock market, keeping just two years worth of big ticket expenses in a short term savings account and putting the rest in stocks.

You should always save at least three to six months of living expenses for emergencies. This will ultimately secure the payment of your expenses in case of temporary unemployment or disability. Also, think about big ticket bills coming up such as the auto insurance bill, and maintenance slush fund to cover an engine getting ready to blow up in your car. These funds should be safe and easily accessible when needed.

While many people may invest in real estate or the stock market, everybody should have a fund that is kept out of either these investments and kept in a savings type account or equivalent investment.

Savings accounts may not provide a very high return but they do offer security, as most of the products are FDIC insured. This insurance covers account balances as high as $100,000. Investing your money into the stock market while saving for that home you wish to purchase in the next year or two can be a risky strategy. Sure the market can go up in that time, and you will have met your savings goal at an earlier time as planned. The market could also fall just as easily, leaving you with a much longer time period before you can get that house.

There are a number of different savings products on the market that are suitable for short term savings. Indeed these short term savings can provide a halfway meeting point if you're saving for that investment sum. These products should and can be compared by looking at the APY (Annual Percentage Yield). The Annual Percentage Yield is defined as the percentage to be disclosed on interest earning accounts that reflects the total interest to be earned based on the institution's compounding rate assuming the funds are in the account for a 365 day year.

Here are some of the short term savings products:

1. Checking Accounts. Yes, there are some checking accounts that pay interest. The advantage of a checking account is you have immediate access to the funds if they are needed. This also can be a disadvantage as there is the temptation to dip into the funds for impulse spending. Another negative is that in order to earn interest a minimum balance must be obtained in the account.

2. Savings Account.

The traditional savings account or savings passbook seems to have gone out of style in recent years. The main reason for this is the low rates traditionally offered on these accounts along with the growth of the Web, where it is now a lot easier to find better returns at the click of a mouse. These rates have dropped from over 2% ten years ago to less than 1% today. On the other hand, these accounts generally have a very low or even no minimum balance requirement which can make them a good place to get children started on the habit of saving money.

Certificates of Deposit for six months or one year are available at virtually every bank and will offer higher interest rates than available in checking or savings accounts.