Short-Term Goals

Saving for something less than 1 year away.

Short-term goals have a timeframe of less than one year. Things like saving for a special dinner -- or an engagement ring to fork over at that dinner. Things like saving for a new laptop or an HDTV. Things that you’ll set aside money for and then need access to that money relatively soon. This category also includes money that’s “between investments." Let’s say a 36-month CD just matured; now you’ve got the money you invested plus the interest. You can park it in a short-term savings account until you’re ready to reinvest.

Where to invest for the short-term.

When you’re setting aside money for something you’ll be buying in less than a year, you need to find a place to put that money that’s relatively safe and easy to get out of, while still paying interest. Your primary choices are going to be high-yield bank accounts or money markets.

• High-yield checking or savings accounts allow you to withdraw funds at any time and don’t lock in your money for a specific amount of time. They also tend to offer good interest rates -- especially from online-only banks.
• Money market accounts also don’t lock in your money for a set period of time and they’re safe because they’re FDIC insured. But they usually require a minimum amount to open the account and a minimum balance at all times. And most only allow a few transactions per month.

Saving rules of thumb.

There are a few rules of thumb that you should keep in mind. No matter what you’re saving for or what stage of life you’re in, your housing expenses shouldn’t exceed about 33% of your income. And your total debt payment (which ideally should be zero!) should rarely exceed 30%. If you’re spending more than that paying down debt every month, this guide is for you.

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Want to learn more? See our pages on Short-Term, Mid-Term and Long-Term plans for saving.