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Seven Steps to Short-Term Savings

The hardest part about saving money is getting started. So start slow, then ramp it up a bit, then put it on autopilot and watch your savings grow. Here are seven steps to short term savings.

Seven Steps to Short-Term SavingsIf your car broke down on the way to work tomorrow, how would you pay for the repairs? The tow truck? A rental car, if needed? If, like many Americans, you would turn to a credit card without so much as a second thought, you could be headed for trouble. Building a short-term emergency fund—even if it’s as little as $1,000—could save you from financial disaster. Here are 10 easy steps to take to plan and build short-term savings that may one day be your financial lifeline.

1. Determine how much you spend monthly

First, you need to stash away at least enough cash to cover the bare necessities for a month. Most likely, that’s housing and utilities, food, and transportation. (You’ll probably want to include any other credit card or loan payments, too). A number of online budgeting—many free—can help you tally up your costs.

2. Pad your target amount a bit

An unexpected car repair is a small emergency; losing your job is a big one. Depending on your career and years of experience, finding a new job after a lay-off could take months, which is why most experts say the ideal emergency fund should contain an amount equal to as much as six to eight months’ worth of living expenses. Use our free emergency fund calculator to get an idea of how much, ideally, you should stash away to protect yourself from job loss.

3. What big expenses will you face in the next five years?

Once you’ve covered your emergency fund, you’ll also want to consider what other major purchase you may be making in the next year. Buying a home? You’ll need a big down payment these days. Is a new car on the horizon? Figure out what you may be buying, when, and how much they’ll cost. Add this amount to your savings goals.

4. Set your saving timeline

How quickly can you get to your goal? If you haven’t started saving yet, it may take a few years to get to your ideal savings goal. That’s OK. Determine how much you can set aside each month, and add up your monthly contributions to find out how many months it will take to reach your goal.

5. Determine where to put your money

When it comes to a true emergency fund, you need quick access to your cash. That really limits where you can save your money: high-yield savings accounts, money market accounts, or money market mutual funds are best. In today’s market, online high yield savings accounts provide the best combination of good interest rates (3.00% or more), security (they’re FDIC insured), and easy access.

6. Just do it

Get to it. When it comes to emergency savings, don’t make excuses. In fact, take steps to jump-start your savings faster. Have a yard sale. Put that unused bicycle up for sale on Craigslist. Get to your first $1,000 as fast as you can.

7. Put it on autopilot

Once you know how much you need—and how long it will take you to get there—don’t give yourself room to screw up. Put your savings contributions on autopilot by having them directly deposited into your savings account. Read more about paying yourself first, and why it works so well.

Published or updated on November 19, 2008

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. I really like the idea of planning for big expenses in the next five years. Most people only think of the now. I will probably have to buy another car, and might even have a kid or two. There is definately some more saving needed in my in my future.

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