Few people get excited about the prospect of saving money but in reality, few people have the money to simply shell out for whatever they want.

Whilst sometimes it can be possible to borrow money or pay for items on finance by taking out loans or credit cards, this works out as far more expensive and is not always viable for items such as a deposit on a mortgage.

Rather than just trying to save as much money as possible, it can be a good idea to have savings goals in mind for both the short, medium and long term. Having a target to aim for makes it far easier to put money away and make sacrifices on spending.

Most people have a long term goal which would require a substantial cash sum, such as going to college, buying a house or even retiring early.

Whilst most people buying a house would have to take out a mortgage, the deposit still requires a hefty wad of cash along with enough money to furnish it and pay for the fee associated with the purchase.

Depending on the individual, building up enough funds to get a mortgage may be a short or medium term goal, if they are already thinking about getting onto the property ladder.

Short and medium term goals are important to have too, because whilst saving for a mortgage or putting money into your retirement fund can take a while to achieve, the satisfaction of achieving smaller targets along the way can act as a strong motivator.

Rather than put all the money into one savings account, some people prefer to split up their separate pots – with one for short term goals, one for medium term and one for long term.

Some people go even further and divide up their savings into specific targets, having one account for a Christmas present fund, one for a holiday, one for saving up to get married and one for a mortgage deposit.

By keeping the pots of money separate, it is possible to visualize how close you are to reaching your goal and can tick off the various components you can now afford as the money mounts up.

Having a specific amount in mind helps to make saving easier as with an end target, it can feel as if progress is being made, rather than just an endless stream of cash being poured into a bank account, never to be touched.

One of the ways in which to make your money work harder for you is to maximize the amount of interest that will be payable.

To do this, it is important to have the right kind of savings account. If you are saving for a short-term goal or plan on getting a mortgage next month, there is little point having an account that penalizes you for withdrawing money without six months’ advance notice.

However, for longer term goals, the kind of accounts or investments that safeguards the capital but do not provide instant access can provide much better returns. There are intermediate accounts as well, which require a much shorter period of notice to take out funds, ranging between a week and a month.

However, when using these different kinds of savings vehicles it is imperative that the right amount of money is saved as it’s no good tying up all your spare cash into an untouchable account if there’s a chance you’ll need it in an emergency!

For homeowners, having a minimum of three months’ worth of expenses instantly accessible is highly recommended. Even for those who have not yet moved out of the family home, building up a bank of cash as an emergency reserve is always the first savings goal that should be strived for, before moving on to more ambitious targets such as a mortgage deposit.

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This entry was posted on Monday, September 5th, 2011 at 6:53 pm and is filed under tips. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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