One of the best things you can do for your finances is to be in the habit of setting short-term savings goals. Many of us think of saving as something we do for the long term, like when we want to buy a house or retire. However, getting in the habit of setting short-term savings goals can help you better manage your finances so that you aren’t spending money you don’t have.
Short-Term Savings Fund
Your short-term savings fund should be about those items that you might want to purchase, but may not have the money for immediately. Such items might include big ticket purchases like a new television, new laptop computer or camping gear. We budget in short-term savings for an art fair that our town hosts each year. We like to be able to buy something that we may not otherwise have the immediate cash for.
The idea is to have the money for larger purchases on hand, without having to dip into your emergency fund, or use a credit card. If you know that a large purchase will be made soon, start a short-term savings fund so that you can collect the money in four to six months. This can also be a great way to save up for a vacation. Be aware of what you might want to buy, and plan for it. Don’t put off by the fact that it isn’t a long-term goal. We sometimes even break down purchases like a $400 game system into three months so that we have a little more room in our budget.
Where to Keep Your Short-Term Savings Fund
You will need a place to keep this money. Because you will want access to it quickly, you will need to make sure that your account is easy to access, and liquid. Either open the account at a local brick and mortar bank (you will sacrifice interest earnings, though), or open the account with an online bank that can link you to a checking account. If your savings account is linked to a checking account, it is easy to transfer the money to the checking account, and then use a debit card.
If you keep the money in an account that is a little harder to get to, make sure that you leave enough time to get your money. You may need to wait three or four — or more — days until your money is transferred into your primary checking. Keep this in mind as you make your plans.
With the right planning, you can set short-term savings goals that can help you buy things you want without breaking your budget.