short term savings goals

Creating Short Term Savings Goals


9 September,2013

Often, when we think about saving, we think about our long term goals. We know that we are supposed to be setting money aside for retirement, and even for emergencies. However, many consumers don’t realize that they can save for short term goals as well.

Just like any other savings goal requires planning, short term goals require forethought. Here are some tips for establishing short term savings goals.

Keep the Money Liquid

With short term savings goals, it’s important to make sure that you keep your money liquid. Since you know that you will need to access it soon, it makes sense to avoid putting the money in long term CDs or in some type of account with limited access. You want the money immediately.

One of the best options is to put your money in a high-yield savings account. You can keep adding money to the account as you work toward your goal, and you will be able to withdraw it as soon as you require it.

It’s also possible to keep the money in a taxable investment account. However, there are risks with this approach. First of all, you might lose money. Since markets can be quite volatile in the short term, you could end up losing money just when you need it to reach your goal. On top of that, you will have to worry about paying the higher short term capital gains tax on your earnings if you have the investments in your account for a year or less.

Many savers find that it makes sense just to keep their money in a high yield account that is FDIC-insured and easy to access.

Figure Out How Much You Need to Reach Your Goal

One of the great things about short term savings goals is that you don’t have to worry about estimating returns over a 20 or 30 year period. You don’t need fancy calculators to help you project possible scenarios. It’s very straightforward. Just figure out how much you need, and determine how long you have to raise the money. Divide the amount you need by the months you require.

If you want to buy a powerful new desktop for $2,500, and you want to do it in five months, you will need to set aside $500 a month to reach your goal. If you want to do it in 10 months, you just set aside $250 a month. You can further sub-divide according to your work’s pay schedule if you want to make it even easier.

Look for Ways to Earn More Money

One of the hallmarks of short term savers is that they often look for ways to boost their incomes. If you know that you need to come with an extra $100 a month to reach your goal in time, you might start getting creative about where that money will come from. Look for ways to earn a little extra money (or cut back on something to save a little more).

Short term saving can be a lot of fun. Since you have the chance to reach your goal faster, it’s easier to make a game of it. It’s hard to make a fun game of the long, slow slog to retirement. Whether you are saving for a vacation, a new computer, a better TV, or summer camp for your kids, short term goals carry with them a certain amount of gratification. It’s easier to make it fun when you know the pay off is coming.

When you have a short term goal to save for, it can make life a little more exciting, since you always have something to look forward to.