How to plan for long term savings goals
How should you approach saving over the long term?
What are long term savings goals?
Long term savings goals tend to revolve around something you want (or more likely, aim) to save for over the next five years or more. These tend to be much bigger, more costly things. Your approach to saving for bigger things over the long term should be different from the smaller things you can save up for quickly.
Examples of long term savings goals
One of the most common examples of a long term savings goal is buying a first home. For many people this requires years of fastidious saving to become a reality.
Other examples of long term savings goals might be building up a large pot of savings to help you study, travel, start a business or put away money for your retirement.
How do you set long term savings goals and achieve them?
When you’re setting your long term savings goals there are a few key things to keep in mind.
Should you save or invest to achieve your long term savings goals?
When you save money it is kept in cash. You can get it all back plus any interest, although when interest rates are low the spending power of your money can actually shrink over time thanks to inflation (the rising cost of things).
When you invest you risk your money in the hopes that it will grow more quickly. Over the long term investing will typically outgrow cash, but as investing comes with risk, this isn’t guaranteed. Make a bad investment and you could end up with less money than you started with.
If you can’t afford to take a risk with your cash, then saving is for you.
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