3 Types of Savings Goals You Need to Understand
Saving and investing should play an integral part of any Plan for Life. Setting savings and investment goals aligned to your plan is critical. But it’s important to remember that not all financial life goals are alike. That’s why you need to look at them in terms of what you need for each goal. And when you need it. These two things will help you decide where to save or invest your money, how long for and how accessible you need it to be.
The starting place is to look at what your short, medium and long term goals are. Then put a financial plan in place for each one.
Short Term goals
Short-term goals are really for a few months or a year or two. They include things like saving for a holiday or perhaps some small home improvements. Short-term savings also include a “rainy day” or emergency fund. A guide for this is to have 3 to 6 months living expenses available that can be accessed should something unexpected happen. These goals are designed for slightly less immediate items than day to day living. They also almost always give you access to your money immediately and involve you taking on little or no risk to your capital but returns can be low.
Medium Term Goals
With a medium-term goal, you can expect to put your money away for a minimum of 5 years but it could be up to 10 years or even a little longer. These goals tend to be for things like education expenses, taking a career break or starting a business. They involve a higher savings target and allow a longer time to get there. This means that you can take on some risk to make the most of investment markets given the longer investment time. These medium-term financial goals are often overlooked between emergency funds and pension planning.
Long Term Goals
Pension planning is probably the most thought about long-term financial goal. For a goal of this nature, you are saving over the course of your career. That’s probably 20 to 30 years or more. There are various types of pension products available, and many employers provide company plans. For this type of long-term goal, it’s never too early to start. When you start you can take more risk but as you near retirement reduce the risk in order to protect the fund you have built up.
Like everything, the goals you set and the financial plan to back them depend on the stage of life you are at as well as your income and outgoings. It can be challenging to put together a plan that allows for all eventualities. This is where the help of an experienced financial adviser can be especially beneficial. That's where we can help! Just get in touch if you'd like an initial confidential chat.