I bet you have heard your grandparents tell you that starting a savings account while you’re young is the best thing you can do for your future. They are not wrong. Now I do not necessarily think they mean just a saving account at your bank but that you are saving money in appropriate ways. Saving your money funds by emergency, short term, and long-term goals will help you start those fundamentals your grandparents were talking about.
If you don’t’ have any money saved up, the first thing you want to do is open a savings account with your bank. This account will be your emergency account. An emergency account does not have a particular amount of money in it per say. If you are not working or still living with your parents or living in college where you don’t have any bills then it should probably have at least $500 in your emergency fund. For those of you that are working you should have 3-6 months amount of bills you would have in that time span. Generally, about $3,000 to $6,000 dollars for the average person. When you reach that amount then you need to work on your short term and long-term savings account. This is the next step because even if you had started with this step and did run into an emergency you would have had to pull money from these accounts. Having an emergency account is just that you will not have to have a huge financial setback just because something unfavorable in life has occurred.
Now that your emergency account is set up we can move onto your goal driven accounts. Goals for your short-term account are 1-5 years for example vacation, buying a house, saving up to have a child. Goals for your long-term account are 5 to 10 years in advance. For you this could mean moving into a bigger house or having your own business. With this idea there are two approaches:
- The first one is that you allow for compound interest to be at its maximum saving funds for all short-term goals in one mutual fund account to provide for each short-term goal in order of your priorities.
- The other route is to have multiple mutual fund accounts for the different short-term goals.
It is up to your preference on how you would like to do it. If you think it would be easier to see your goals individual through different accounts then the second option may be for you. The disadvantage is that you will not be using the maximum benefits of compounding interest. These accounts will not have a debit card because you do not want to be able to access this money easily. When using these funds, you want to make sure that there is more than one step to make sure that you actually want to access this money. I like this because it will make you think about this decision. Also note that when using this money, you want to make sure that it is being used for its intended purpose.
Setting up at least these three things will help get you on the right financial track in terms of savings. Don’t forget that you can’t save properly without an appropriate budget. Keep in mind with your savings account this rule: you cannot touch them. This just means do not use this money for anything other than what it was intended for. Good luck on your saving adventures and let me know if this article has taught you anything new about saving!
Hi, I’m Annette.
Known for my silly personality, I am a lifestyle blogger. I enjoy volunteering, learning to do makeup, reading books, learning to cook, and developing myself as a person.