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Plan to Save Long-Term

PayDayHawaii is proud to work with America Saves this week–we’ll be focusing on ways to save or not waste money with blog posts every day this week!

What is “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.

Why do you need to save long-term—isn’t doing the best you can to save every month good enough? 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 that short-term savings plans.

Some things for you to consider:

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 long run, the average return (the profit on your 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.

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 simply 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.

America Saves is a campaign managed by the non-profit Consumer Federation of America. It seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth.

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