As you ease yourself into the new year, finances are likely to be on your mind. Money often features within people’s new year resolutions and the need to budget and save more tends to take the top spot. With this in mind, today we are sharing with you the 3 types of savings that every family should have, to help you prioritize those plans.
Savings for emergencies
Savings for emergencies are your ‘just in case’ savings. These are the savings that you put aside so that you have something to fall back on should something come up.
These savings are usually best kept in an instant access account as you do not know when you might need to get to them. It makes sense to save into this account each month so that it builds up over time. This account is likely to see withdrawals fairly regularly as your savings help you to fund those things like your car breaking down or your roof needing repairs.
Savings for a certain purpose
Most of us will save for a certain purpose, and that purpose will change over time and as things are paid for. For example, we might need to save up for some home improvements, for a holiday or perhaps we want to buy a new car.
In order to successfully save for these types of things, it does help to set up a separate account for them. You should then work out how much you will need and over what time you would like to achieve this sum. You can then set up a regular payment to this account to help you to reach our target.
Savings for the long term
We should all be making some kind of contribution to savings for the long term. We know this, we know that we will need money during our retirement years, we might need savings to help with assisted living costs and we might want savings to travel with during the later years of our lives.
The good thing about these types of savings is that they can take many different guises. It can be difficult to stick to a strict savings plan for the long term and retirement funding as something always seems to come up meaning that we end up dipping into our funds. These savings plans can differ as they are often things that we cannot dip into.
In many cases, savings will be in the form of a pension plan and we are unable to access those early. Another way of saving is to invest in your own home. If you are a homeowner, by paying off the mortgage over time and then keeping your home in good condition, you are building up a savings fund. This is a very valuable asset and one that you can either liquidate cash from or sell on at some point. The same can be said of other properties that you may own, or perhaps you have art or collectibles that are appreciating in value with age.
When saving for the longer term, it can often serve you well to save in these ways as the funds are locked up.