The idea behind the three-bucket strategy is simple: You keep your money in three different buckets based on when you think you’ll need it.  Short-term bucket. This is money you think you’ll need to access in the next one to four years. Consider keeping it in cash, such as high-yield savings accounts or certificates of deposit (CDs) with staggered maturity dates (a type of fixed-income ladder). Medium-term bucket. If you think you’ll need the money in the next five to seven years, consider holding it in income-producing, relatively “safe” assets like high-quality bonds and certain dividend-paying stocks. This can help you keep pace with inflation. Long-term bucket. Finally, the money you want to grow over the long haul can be kept in assets that are often seen as riskier, such as growth stocks and certain alternative asset classes. This is money you don’t think you’ll need for at least seven to 10 years, so there should be time to recover from a bear market. First, understand your financial needs and goals. Then you can plan how much money to keep in each bucket and make adjustments as needed.