Saving money strategically is a key factor in maintaining financial stability. If you can’t save effectively, it will be difficult to reach your goals or avoid problems with debt when unexpected events come up to cause problems for your budget. Your ability to find the right savings mix can make or break even the best financial plan.
Knowing where to save… and when
Savings can be divided into three basic categories:
1. Short-term savings includes things like your rainy day fund. This is the money you have saved in an easily accessible account for those “just in case” moments. When something in your home breaks or you get in an accident on the road, this is the money that helps you get through it without relying on your credit cards.
2. Mid-term savings includes things like a financial safety net that you build for yourself in case you get laid off or are unable to work. It also includes savings for specific financial goals, such as the money you save to buy a new TV or furniture, or the down payment you want to make on a new car. In general, mid-term financial goals are anything you want to make happen in the next 2-5 years.
3. Long-term savings is where you save for the future – for things like retirement and college for your kids. This kind of savings helps ensure the long-term financial success of your entire family.