Some individuals cannot get past the term savings, much less be bothered knowing the difference between long-term savings and short-term savings. However, learning about short-term savings and how it is beneficial is an important step in learning to save at all.
Short-Term Savings: What It Is
You do not have to be a financial genius in order to learn how to apply short-term savings to your life, as well as your budget. Short-term savings, simply put, is putting money aside on a steady basis to save up for unexpected surprises or even for planned goals.
For example, a short-term savings goal is perfect for a rainy day fund in which you may have to dive into to repair a broken boiler or an unexpected car repair. A short-term savings plan is also an excellent tool for a family vacation or home décor project.
Various Uses for Short-Term Savings
A short-term savings plan is an excellent way to set aside funds for emergency purposes. We all know, all too well, how unexpected home repairs, auto repairs, or even doctor bills can spring on us. Having a short-term savings plan for these life’s unexpected moments is a great way of just dealing with the stress of the situation rather than also having the stress of how you are going to pay for it.
Another great use for short-term savings is the family vacation or even an unnecessary splurge on home décor. Utilizing a short-term savings plan to put aside a set amount of money is a great way to pay for that family vacation. Now, all you have to do is plan the vacation – the funds are already there.
How to Start a Short-Term Savings Plan
Starting a short-term savings plan is really not complicated at all. It is a simple matter of looking at your income, seeing what your expenses are, and then setting aside a small amount of money from those excess funds and putting it aside.
It is extremely important, however, that your short-term savings plan is in a place that cannot be touched until it is actually necessary. If you pick on it constantly, it will not be there for you when you need it.
A six-month CD, regardless of the return percentage-wise, is a great place to keep a short-term savings plan. It is in a place that you cannot touch and it is not a significant amount of money that will be missed if you put it aside every week.
Another great way is to get an envelope and put it in a lock box. As simple as this may sound, we are all in a rush to get somewhere. If you have to take the time and trouble to find the key and open the lock, this may be just enough to deter you from picking at your savings.
A short-term savings goal is worth its weight in gold - especially when you see that you have no worries of how to pay for that repair or where the money for vacation is coming from this time around.