I’ve found that one of the most confusing things about saving money is figuring out what in the world you actually need to save for. Everyone pushes this idea that you need to have a back-up stash of cash in your possession in case anything unexpected should pop up – even as kids, most people have piggy banks to save up spare change for a rainy day. But what about things like life events (weddings, having a baby), large purchases (buying a house or car), or vacations? How do you know how much money you need and what you need it for? The answer to these questions will obviously be a bit different for every person, but here’s a few tips and things to consider when thinking about putting money aside for later use.
What exactly are you saving for? You should always have an emergency fund in case of, well… emergencies. You never know when something might catch you by surprise – you need to replace a part on your car, an unexpected home repair, or even the loss of a job. But what if you have a trip coming up this summer that you’d like to have some extra spending cash for? A smart idea would be to divide up what you’re saving every month into a general savings fund and a “special occasions” fund for things like trips, special events, or any sort of purchase that wouldn’t ordinarily be made frequently.
How much can you afford to set aside? You’re probably already saving a set amount every month (hurray for you!). You don’t necessarily have to split what you contribute to these different savings funds 50/50, but you should decide how much you think would be appropriate for you. Some things to consider might be what other things you need to save for, when you’ll need to have that money by and how long it’ll take you to save it, and how much you want to keep in your account just in case of the unexpected.
Carry over your funds. You did it! You successfully saved the entire amount you were aiming to have for that trip to the beach. But alas – you were smart about your spending and you came home from vacation with $150 to spare. Now what? You can either add it to your general savings fund, or you can put it towards any other more short-term savings goals you might have. Don’t spend money just to spend it! It can’t hurt to have a little extra cushioning on your cash pile.
What are some other things you find yourself saving for? Share them with us!