Saving Strategy: Why You Should Save for Multiple Goals

4 MIN. READ

 

Key takeaways:

 

• Earmarking your savings helps you keep track of your money and ensure you don’t spend your savings on the wrong thing. 
• You can divide your money between an emergency fund and a mix of short and long-term savings goals.
• Using the right savings products makes keeping your money organized a lot easier. 

Putting money aside is great, but what’s even better is saving with a purpose. 

Without purpose-driven saving, you might spend the money you worked hard to save on something that doesn’t reflect your financial goals.

To prevent this from happening, you can use simple savings strategies like earmarking your money. We explain how to be smarter about your savings and achieve your goals. 
 

Why You Should Earmark Your Savings 

A common saving mistake we see our members make is to open a savings account and deposit all their extra income in it. 

After a while, you lose track of what these funds are for, and you end up spending the money you saved on the wrong thing. Your emergency fund might end up covering your next vacation, or you might accidentally spend your home renovation budget on a new car.

To keep your savings organized, we recommend creating different earmarked funds. There are different ways of doing it: 
 

• Keep your money separate in two or more savings accounts. You can also mix and match savings products, for instance, by opening a savings account along with a holiday club account. 
• If you use our digital or mobile banking platforms, you can take advantage of our PFCU Money Management feature to set savings goals and track your progress.
• There’s also the old-fashioned pen and paper method. To do this, you create different savings categories and manually update the balance every time you deposit money in your savings account.

Dividing your savings into different categories has several benefits: 
 

• You’re getting a quick view of your different savings goals at a glance. 
• It’s ideal for both short-term and long-term savings goals. 
• You can easily tell if you’re getting behind and need to adjust your savings habits. 

How to Divide Your Savings 

Your savings strategy when breaking down your money into different categories should reflect your unique goals, but there are general tips you can follow.

Start With Your Emergency Fund 

If you don’t have an emergency fund, saving your first $1,000 in a high-yield savings account should be a top priority. Keep adding to it over time, ideally until you have enough to cover three to six months of expenses. 

Use our savings calculator to see how quickly you can reach this first savings goal. 

Short-Term Savings Goals 

Next, you can look into short-term savings goals. These can finance a mix of small and large purchases, such as replacing your old washer or even paying for a small home renovation. 

Long-Term Goals 

Your savings strategy should include long-term goals, such as saving for a down payment on your next car or home. You can also save to finance your child’s education or bundle your retirement savings into your earmarked savings strategy to make managing your money easier.

Trips and Fun 

We also recommend creating a separate savings fund for fun. A vacation club account is a great way to save for trips, gifts, and other expenses. 

How to Get Started With These Savings Strategies 

Keeping your savings organized is easier than you might think: 
 

• Once you have identified the different categories you want to save for, set realistic amounts to save and timelines. 
• Pay yourself first. When your direct deposit hits, put money into your savings account right away so you don’t spend it.
• A sound budgeting strategy makes it easier to figure out how much you can afford to save that month, so you can put that money aside as soon as you get paid. 

Once you know how much you can save this month, distribute this money between your different funds. For instance, you might want to allocate 50% to your emergency fund, 30% to your long-term savings goals, and share what’s left between a small short-term project and your vacation savings. 

To get started with this savings strategy, you should review savings products and the right one for your goals. Look for things like a good interest rate and convenient money transfer options to make saving easier.

How Can PFCU Help With Your Savings Strategy?

At Power Financial Credit Union, our goal is to help you achieve your savings goals. It’s why we offer a family of products designed to meet different needs. 

You can get started with our standard savings accounts with as little as $5 and earn competitive dividends on top of not paying any monthly or overdraft fees. Once you’re ready to save for different goals, you can keep your money organized with products like our Coverdell education savings accounts or club savings accounts. 

If you need help with your savings strategy, our representatives are here to guide you if you contact us online or visit the nearest PFCU branch. 

FAQs About Savings Strategies 

Should you save for your emergency fund or pay off debt first? 

Doing both would be best, but if you have high-interest debt that makes it hard to save, paying off or at least consolidating your debt should be a priority.
 

How much emergency savings should I have? 

Having $1,000 in a savings account is the bare minimum. Ideally, you should have enough to cover your usual bills for three to six months.
 

What’s a good emergency fund ratio formula to use? 

Go over your budget to determine which expenses are essential. Add them up and multiply this amount by three. This is the minimum amount you should have in your savings account. 
 

How much of your income should you save? 

According to the 50/30/20 rule, you should spend half of your income on essential needs, 30% on wants, and 20% on savings. However, you should adjust these percentages based on how much you earn and what your priorities are.