Editor’s note: This story originally appeared on Personal Capital.
We’ve all heard about the importance of saving more money. Putting aside dollars for a rainy day can be very beneficial to most of us.
Amid the COVID-19 pandemic, 51% of Americans say owning an emergency fund is now a higher financial priority than it was before the pandemic, according to a recent survey by Personal Capital and Empower Retirement.
Without a goal to save, I tend to lose motivation and end up using my money for more urgent needs. I don’t think I’m alone in this thinking.
To motivate myself, I need a goal or reason to save.
If you find yourself wasting money, but you’re not sure why, let’s tie some goals to those savings.
Here are several savings goals for you to be happier today and tomorrow.
Experts suggest that you should have three to six months of expenses in your emergency fund. This way, you are protected if the unexpected happens.
For example, if you lose your job and have not been able to find work for three to six months, you are covered. Or if your refrigerator broke down, a car tire broke or your child threw a glass in the bathroom sink and it broke (ahem, personal experience), you’re covered.
Having an emergency fund also gives you peace of mind. Knowing you have money in the bank just in case the worst happens is a beautiful feeling.
Another life inevitability, we hope, is retirement. At some point in your life, you will want to stop or slow down your work life.
Even if you think you’ll never stop working, you may one day have to stop for health reasons. As your body ages, your ability to function as you used to may be affected. Or there may be an administrative change that forces you to move out before you are ready.
To prepare for retirement and the income we’ll need, we need to start investing early. By using tax-advantaged retirement accounts like a 401(k) and IRA, we’ll be able to save for retirement and save on taxes.
The key to creating a bigger retirement egg starts as quickly as possible. With more time on your side, compound interest has a better chance of working its magic.
One of the savings goals I have right now is to upgrade my car. I think my 12 year old has another three to five years before it turns into a real clunker.
With this time frame in mind, I started putting up some cash each month in a savings account to prepare for my current car’s funeral. It will be a sad day, but at least I will be prepared.
My goal is to buy my “new me” car for cash. Owning rather than renting is more beneficial for me because I want to keep my monthly cost of living low. If you are able to do this in the long run, it will help with the previous goal we talked about…Retirement!
With two children at home, we are investing in 529 college savings accounts to support future college costs. Our 529 accounts will help us cover eligible education expenses for soon-to-be teens when they head to school.
Like the accounts with tax privileges listed above, 529 allows your earnings within the account to grow tax-free (if used for eligible expenses). Also, Michigan (along with many other states) allow full or partial deductions for 529 contributions. These tax benefits make college savings more attractive.
Investing in college is not the same as investing for retirement. The sooner you start investing, the better off you are. We are fortunate that we got some good advice early in our children’s lives and started calculating them as soon as they were born.
Even with this smart move of money, it will be hard for us to catch up with the increasing cost of college. Some estimates put tuition fees up at an average of 8% per year – twice the rate of inflation!
We live in Michigan. Our need for a winter escape to a warm sunny climate is almost a family necessity.
This is why we put a large portion of our income each month into our holiday fund. This way, we have the money ready when we want to get out of town.
If you’re looking for a quick excuse to set aside some money, let this stress-reducing savings goal rise to the top of your list. There is nothing better than an escape, you are ready to take a breather from it all.
6. Home down payment
With home prices soaring across the country, the need for a solid down payment on a home is more important than ever. If you’re shopping for your first home, this savings goal can take some time.
Set a savings goal based on when you want to buy your home. With frequent deposits to your home down payment account, you’ll hit your big goal before you know it.
We did this with our first family home. Outside of the monthly savings deposits, we also took advantage of any “new money” that came into our house. Newly discovered cash like bonuses, commissions, tax refunds, and even Facebook Marketplace sales were directed toward the down payment on our future home.
If you’re ready to make your big move, check out our Free Personal Capital Guide to Buying a Home.
7. Big Giving
I love spending money on myself and my family, but I also love donating money. We save 5% of our income and throughout the year we can make large donations to charities in need. These are the charities and causes that call our hearts and make us feel proud to give.
With another 5%, we give away gifts, cash and surprises to family, friends and neighbors in need. There’s something really special when you’re able to tip $100 to a waitress in a working-class neighborhood or help your 18-year-old nephew start an investment account with the gift of an initial contribution.
This kind of 10% giving makes our family feel happy. We wouldn’t have this ability or tradition without setting and sticking to a savings goal.
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