Everyone knows how important it is to save for retirement but what about short-term savings goals? Maybe you want to plan to travel somewhere or save up enough cash to buy a high-tech gadget? If you have plans to make a large purchase within a short period of time, you will want to come up with a short-term savings plan to meet the goal. Here are a few tips to follow in order to pursue your plan:
When talking about short-term savings, one should approach things differently than one would for long-term retirement goals. Remember that timing is everything when it comes to investments. For instance, you want to retire in the next 20 years. In such case, your financial advisor will usually recommend a very different retirement portfolio that consists of 60% stocks. Having a large window of time, if the stock market takes a hit, there will be plenty of time for your portfolio to come back. But if you are planning to save up for something in the near future, you must stay away of high-risk investments like stocks because one wrong dip in the stock market could wipe up all of your savings.
Benefit of bonds
In order to achieve short-term goals, you might want to give a shot with bonds. A bond is a debt investment where you are essentially loaning money to a corporate or government entity. Bond is usually used by companies, cities and states to raise funds for different projects. After a specific time, you will be able to earn a variable or fixed interest rate on a bond. One big benefit of a bond is that the interest earnings are higher than those from a bank savings account. And you can also handpick bonds that will mature and be available be a consistent date in the future.
No to savings accounts
Since stocks are very risky for short-term savings, you may consider just putting your money in a savings account at your trusted bank. While this is really a safe and low-risk option, you will earn very small interests. The average interest rate in a UK savings account is a mere 0.06% for all balances. That is more than you’d earn keeping your money in a box under your cabinet, but with rates that are so low, your savings will probably won’t keep pace with inflation.
Seek advice from a pro
Visit Irfan Qadir Banker website here to know more about plans and strategies to help you save money