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Plan to Save Long-Term

What are “long-term” savings?

Most in the financial industry consider any savings plan that is ten years or longer to be long-term, though consumers tend to think long-term is five years or more.

You may be asking, why do you need to save long-term–isn’t doing the best you can to save every month good enough? Yes, there are some specific reasons you’ll need to consider long-term savings:

  • For retirement
  • For college
  • To buy a home
  • To buy a small business.
  • To buy a new car
  • Not considered long-term savings: your emergency fund

What should you do with savings that you intend to be long-term?

In a word, invest. You’ll have to think more carefully about what kind of saving plan (or financial investment product) you want to put your carefully set-aside money in. There are more options—plans, or products—for you to review, and you’ll have to seriously think about what your goals are for your savings. How comfortable are you with risk, what interest do you want to make, and how often might you wish to access the funds?

Long-term savings plans have more flexibility, and there are more options to choose between than short-term savings plans.

Some things for you to consider:

Before you start investing: You should consider riskier long-term investment only after setting aside the equivalent of 3 to 6 months of income in an insured savings account for emergencies. When deciding how much is enough to set aside, consider your health and job security, and your families’ needs. What amount available for immediate access makes you comfortable?

Your risk tolerance: You’ll have to realize that with a long-term investment, such as in stocks and bonds, the value will go up and down from year to year. But in the historical long run, the average return (the profit on investment) has been very positive. This is something you may or may not feel comfortable with.

Choosing an investment that fits your goal: If you are saving for retirement, you might want to go with a 401k or IRA or Roth IRA plan. To save for college expenses, most states offer tax-deferred or tax-exempt savings plans called 529 plans. If you are saving for a home down payment, you might want something ultra-safe, like a high-yield savings account. It’s up to you to do the research on what plan will suit your goal best.

How, and how often, you want to access your savings: Unlike a checking account, or a short-term savings account at a bank, you can’t access these kind of investment accounts as easily as walking up to an ATM. You CAN access them, but it will usually take some time and planning, and may involve penalties for early withdrawal.

How much interest you want to make: Realize that the most interest comes with the most risk, so you’ll have to balance those two factors.

Service fees and easy access to information about your account: Compare several organizations: their fee structure, their product offerings, how they provide information about your account (and how timely it is), and if you’ll have a live account representative to talk to (even if only by phone).


  • Consider what your needs are for your savings.
  • Decide what your savings goal and purpose is.
  • Do your due diligence and research on the pros and cons of the investments you are interested in, and in the companies you are considering investing with.
  • Be sure to consider your emotional investment profile: your tolerance for risk, what company you feel comfortable with, if it feels okay that you won’t have immediate access to your savings.
This entry was posted in Financial Education, Mortgages and Home Ownership, Saving and Investing. Bookmark the permalink.

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