How to Save for Short Term Loan Goals

 

This week I was talking about ” How to Define Concrete Financial Goals ” and today I deepen a little more focusing on those financial goals focused on the short term .

To achieve success in these types of objectives it is best to have the money perfectly separated for each of the specific objectives. With an Excel in which you clearly indicate what money is for what purpose is more than enough.

One for the emergency fund and another account for the rest of the savings

One for the emergency fund and another account for the rest of the savings

However, two savings accounts, one for the emergency fund and another account for the rest of the savings, let’s call it the savings fund, works very well because it separates the most important thing: your emergency fund from the rest of your savings.

Remember that the emergency fund is untouchable , so mixing it with the rest of your savings can be a bad idea.

What is a Savings Fund?

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A savings fund is money destined to be used in a large expense within a few months or years . For example, an important vacation, the purchase of a car, the renovation of your home, etc.

In general, they work great if you separate a specific amount of money to this savings fund every month and gradually let it accumulate.

A savings fund has the enormous advantage of preventing the large expenses you make in your life from obligating you to borrow a loan.

Instead, you can have what you want without paying interest or borrowing . Not only do you earn the return from the savings account where you have deposited your money, but also the interest you do not pay for having asked for a loan .

Where to Invest the Savings Fund?

Where to Invest the Savings Fund?

The best place is a savings account . This financial product has a good return, without expenses or commissions and total money availability at any time. All these factors are vital to create a savings fund.

A couple of good savings accounts are the Good Finance with a 2.40% APR but only during the promotional period, the first 4 months and the COINC Account with a 2.25% APR but without a promotional period.

Let’s look at an example of the usefulness of this savings fund. Let’s say you want to make a special trip with your partner. The cost of the trip is 3,500 euros and you want to do it within a year. You have to allocate approximately 292 euros each month to this goal to achieve it.

At the end of the year you will have enough money to make the trip and more due to the profitability of the savings account.

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