Short terms savings are funds you set aside for use in the near future. The account is meant to be used for things like emergency home repairs or unexpected medical bills. The benefit to having a short term savings is that in a few short years you can accumulate enough money to take care of your present day needs, while still putting money aside for certain long term goals like retirement. But because short term savings are drawn upon much earlier than long term savings, you want to be sure to get the most out of your dollars, so it is important to know where to invest or “stash” your short term funds.
Five good spots to put short term savings are:
- An online account, where you can easily deposit funds but are less likely to withdraw due to geographic or other restrictions.
- Short term bonds.
- An interest bearing checking or savings account, which may be through an online account or where you currently do your banking.
- Certificates of deposit.
- Making payments toward high interest rate debt, and then putting the payment into a savings account once the debt is paid. Doing this allows you to not only pay off debt, but also start saving once the debt has been repaid.
Saving for an emergency or taking action to start a savings account is always a good idea. When life throws a curveball, having money set aside for the unexpected will help you from going into debt to cover surprise costs. It is always best to allow your money to work for you whenever possible, which may be through a short term investment or might be by putting as much as possible into an employer backed retirement account. If you are not able to establish an emergency fund and still encounter expenses you were not anticipating, you do have options to help control the debt that accumulates. You can try to negotiate lower interest rates for loans when necessary, seek to modify your mortgage so your payment drops, or even file for bankruptcy when your debt load becomes too much to bear. If you need help finding a way out of debt, call us today.
For help eliminating debt and for tips on how you can start an emergency or short term savings fund, contact us at www.DsouzaLegalGroup.com.