Saving For Long-Term Goals

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Saving For Long-Term Goals

Long-term goals are some of the most important savings goals you will work to achieve. That’s because they are very costly, so they require careful planning and consistent savings to achieve them.

Just as with the other time frames, the best way to achieve long-term goals is to establish a savings and investing plan. There are many types of investments that can help make achieving long-term goals a bit easier.

Types of Long-Term Goals

There are many different types of long-term goals. Long-term goals can involve expenditures in the tens to hundreds of thousands of dollars.

Retirement is one of the most critical long-term savings goals out there. Because retirement can last 30 years or more, you must have a plan to save regularly to pay for expenses in retirement. While Social Security is likely to cover some of those expenses, you can’t count on it to fund all your expenses.

One advantage of retirement planning is that many employers offer workplace retirement plans such as 401(k) plans and may match some of the contributions you make. A match is the equivalent to free money, because it is money put into your 401(k) account that you wouldn’t otherwise have. Also, when you contribute to a company 401(k) account, money is typically deducted from your paycheck automatically, which makes it easier to save.

Another long-term goal is saving for college for a child. If you start saving when the child is born, you’ll have between 18 and 22 years before you need the money. Saving for a down payment on a home is another long-term goal.

Funding Long-Term Goals

Because long-term goals are so expensive and the time horizon is long, there is a wider range of investing and savings vehicles that are suitable for meeting those goals. Potential savings and investment vehicles range from mutual funds to savings accounts to certificates of deposit.

As we’ve mentioned, one great way to fund at least part of your retirement is through a 401(k) plan at work, where you set up an automatic deduction from your paycheck that many employers will match at least part of. Then, you decide how to invest that based on the menu of investment options that your employer provides. That usually includes money market funds, bond funds, stock funds, funds that include both stocks and bonds, and other types of investments.

If you’re saving for a child’s college savings account, you can set up a college savings plan through your state’s college savings plan or another state’s. Many states allow automatic investment plans for as little as $25 a month and have a wide menu of options.

For other goals, it’s simple enough to set up a special savings or investment account dedicated to that goal. If you are saving for a down payment on a house that you want to make in eight years, you could set up an automated savings plan into an investment account such as a mutual fund made of bonds and stocks. Then, as you get closer to the goal, you could move that into a savings account so you wouldn’t lose money if the market went down.