Hi,
You can put the secrets in the azure vault and point to the vault using vault references.:
[https://learn.microsoft.com/en-us/azure/app-service/app-service-key-vault-references?tabs=azure-cli
for example, you add a password to the vault and this to your local.settings.json
@Microsoft.KeyVault(SecretUri=https://myvault.vault.azure.net/secrets/mypassword/)
you can use that in both local.settings.json and in the Function app "app settings" for better security