Saving money helps you achieve financial security, stability, and freedom. It allows you to cover unexpected expenses, pay off debt, and fund life goals without unnecessary stress.
You never know when you’ll need your savings, so it’s important to start investing in both short-term and long-term savings accounts today to secure your financial future.
Learn the difference between these types of savings accounts and where to keep your money depending on your goals.
What Are Short-Term Savings?
Short-term goals are typically within a five-year window. You can open a short-term savings account with a specific goal in mind or to create a safety net in case there’s an unexpected expense.
Short-term goal examples:
- Emergency fund
- Payments toward rent, insurance or student loans.
- Credit card debt payments
- Personal goods
- Minor repairs and home improvements
- Low-cost medical emergencies and procedures
Where Should You Put Your Short-Term Savings?
For short-term goals, you’ll want to keep your money somewhere secure and easily accessible. This means using a certificate of deposit (CD), money market account, traditional savings account, or a combination of those accounts.
With personal savings and money market savings accounts, you’ll have quick access to your money and generate interest. You may also want to consider opening a personal CD account, which is insured by the FDIC, typically runs between three months to five years, and offers a guaranteed rate of return.
What Are Long-Term Savings?
Long-term goals are usually your big-picture costs that’ll be at least five years out. These distant goals take more money and time than short-term goals to reach, so you’ll want to start growing your long-term savings as soon as possible.
Long-term goal examples
- Buying a car
- Major home renovations
- Retirement goals
- Large medical bills and expensive procedures
- Savings in case of a job loss
Where Should You Put Your Long-Term Savings?
With long-term goals, time is on your side. Whether you choose to invest in the financial markets or long-term savings accounts, you can rely on time to help build your wealth.
If you are willing to accept risk and spend time managing your investment portfolio, putting some of your long-term money into the stock market could lead to big returns.
If taking big risks make you uncomfortable, long-term savings accounts could be the way to go. They’re a great option because they allow you to leverage the power of compounding interest over time. In addition, some types can be used to further specific financial goals. These include individual retirement accounts (IRAs), employer-sponsored retirement accounts, and 529 plans for college savings.
Start Saving Early
Setting short-term and long-term financial goals is an important step toward becoming financially secure. Stop by your local branch today to talk with a representative about your savings goals.