Saving for goals
Saving is about more than putting money aside. Learn when saving makes most sense, what to look for in a savings account, and how to match your approach to your goals.
Savings are commonly used for goals where flexibility and stability are important, and where timing and amounts are relatively predictable. In this lesson, we take a closer look at how saving is commonly used in practice and what to consider when saving for a goal.
What is saving?
Saving is setting money aside somewhere safe and accessible, usually earning a modest interest rate.
Types of goals commonly linked to saving
People often use savings when they want to keep money safe and available for planned or unexpected expenses. Saving is often associated with goals where:
🛡️ | ✈️ | ⏳ |
|---|---|---|
Building a financial buffer | Planning a holiday or large purchase | Covering expected expenses in the near future |
In these situations, stability and flexibility are often more important than growth. These goals typically share a few characteristics:
- The timeframe is relatively short or medium-term
- The required amount is known or can be estimated
- Access to the money is important
What to consider when saving for a goal
When saving for a specific goal, people often think about:
⏰ | 💰 | 🔄 |
|---|---|---|
Timing When will the money be needed? | Amount How certain is the required amount? | Flexibility Might the timing or amount change? |
Saving is often used when these factors are relatively predictable.
Types of savings accounts
Different types of savings accounts offer different features:
🔑 | 🔒 | 🎁 |
|---|---|---|
Instant-access savings account | Term deposit (fixed-term savings) | Loyalty / bonus savings account |
Instant-access savings account
Key characteristics: | 👉 Interest rate may change over time 👉 No fixed term 👉 Money can be deposited or withdrawn whenever needed |
Typical use: | Emergency fund, short-term savings |
Term deposit (fixed-term savings)
Key characteristics: | 👉 Fixed interest rate agreed in advance 👉 Deposit period such as 6 months, 1 year or longer 👉 Early withdrawal is usually not possible |
Typical use: | Saving for a known future expense |
Loyalty / bonus savings account
Key characteristics: | 👉 Interest may include a bonus if funds remain for a certain period 👉 Withdrawing early may reduce the interest earned |
Typical use: | Savings that can remain untouched for longer periods |
In real life 🧑🏽💼
🏖️ | ❓ | 🔑 |
|---|---|---|
David wants to build a financial buffer and save for a holiday next year. | He asks himself when he'll need the money, whether he needs quick access to it, and how certain he wants to be about the amount he'll have. | Because he'll need quick access to his money and knows exactly when he'll need it, he chooses a savings account with instant access. |
Disclaimer: Investing involves different costs and risks to saving. You could lose some or all of your invested money.
Key takeaways
✓ | Saving is commonly used for short- to medium-term goals |
✓ | It offers stability and accessibility |
✓ | It involves a trade-off: lower uncertainty, but typically lower returns and changing purchasing power over time |