Saving For Mid-Term Goals
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Saving For Mid-Term Goals
The guiding principles around setting and achieving mid-term goals are similar to setting and achieving short-term goals. One important key is to set the specific goals that you want to achieve, then decide on how much money you can afford to put toward those goals, then set up an automatic savings and investing plan to fund those goals over time.
For example, if you have a mid-term goal of paying for a new roof that will cost $8,000 and you believe you will need to pay for the new roof in three to four years, you can divide that amount by 36 months (three years), 48 months (four years) or even three and a half years (42 months).
Here’s how that would work in terms of the amounts you’d need to save for those different time frames:
It can seem like a lot of money to save for one goal, but remember that while it’s ideal to shoot for saving the whole amount, that even some savings is better than none. For example, if you have so many goals that you can’t save all the money you might need for a new roof, you could set a smaller goal at the beginning and build up to saving more, or set a goal of saving half of the amount you’d need to pay for the roof.
Typical Mid-Term Expenses
There are many mid-term expenditures that you could identify and create savings goals around. These include:
- A new car
- A new roof
- Paying off a loan, such as a home equity line of credit
- Remodeling a bathroom or kitchen
- Saving for a college education for a child who is in high school
- Your child’s wedding
As with all your goals, it’s important to prioritize goals and not set too many; otherwise it can be discouraging and you may not end up saving much of anything for all of those goals. So you could pick two of the mid-term goals you have—perhaps the most important ones—and make a goal of funding those and reduce your expectations around the other goals or decide not to pursue them.
Choosing a Mid-Term Savings Vehicle
There are numerous mid-term savings vehicles that you can choose from to reach your goals. You will want to use different investing and savings vehicles for mid-term goals that don’t need to be funded for four or five years as opposed to those that have an end point of two to three years.
So, if you are saving for the college education of a child who has just entered high school, you could choose a conservative stock mutual fund or a balanced fund that invests in both stocks and bonds. Then, as that child gets closer to college, you could move those funds into a money market or savings account so they won’t be subject to as much risk when college is just around the corner.
You can also use some of the same savings vehicles as short-term goals, such as a money market account or certificate of deposit with a term aligned with your goal. A short-term bond fund might also be appropriate.
