Do you need short-term savings? Yes, you most certainly do. And it’s likely you need far more than you have stashed away somewhere. Short-term savings is more than the few hundred you stick in a statement savings account at your local bank to cover next year’s Christmas presents. True short-term savings is money for emergencies and planned expenses in the next three to seven years. And you definitely need to be planning and routinely putting money in accounts to build up this type of savings.

Why Short-Term Savings?

If you thought you were doing fine to pay your bills every month, you are doing well. You’re just not doing well enough. It’s not enough to get by from one paycheck to the next, although increasingly more Americans are doing exactly that. You need to be planning for the items life throws at you or that you want to do without the element of surprise, and to cover those, you need money sitting safely in an account. Lots of money. Otherwise, you can get caught in a nasty trap of credit card debt.

Consider this: You save a few hundred when you can (which is almost never), but the rest of your money goes to cover all the things you need to have a productive life. Then, one day, your car breaks down, you decide to get married, or your wife demands you take her on a vacation for the first time in fifteen years. Your $300 in savings isn’t going to cover it and the other options involve borrowing money from someone else.

And when you borrow money, you have to pay for the privilege. If you borrow it from a credit card company by using a handy Visa card, you’re going to pay dearly – possibly for the next five or six years. Not to mention the money you’re paying on something you did three years ago isn’t going into savings for the next round of emergencies.

But wait! Maybe you are a good financial citizen and are saving correctly. You’ve been investing for years in the stock market and you even own some real estate that is appreciating nicely despite the slowing market conditions. Yes, you’re doing well to be saving, however, the stock market and real estate are savings best for the long-term. Looking at the same above scenario, you need money now.

You have two options. You can sell stock, pay commissions and possibly even take a loss if the market is low, or you can sell real estate which will probably take two to four months to complete and you’ll waste a lot of money in commissions and closing costs. Not to mention your wife will be furious she’s had to wait that long for a lousy trip.

Liquid Gold

So it’s obvious you not only need money stashed away for the short-term, you also need those funds to be readily available the day you need them. The term for this sort of access is liquidity and your short-term savings need to be stored in a variety of short-term instruments ranging from CDs and money market funds to even something as generic as a traditional statement savings account.

Short-term savings is critical, and if you need helping figuring out where to begin or just want to pat yourself on the back for a job well done, you’re in the right section. You’ll find all of the information you need to make comprehensive (and correct) decisions about taking care of your investments so you’ll never have to worry about having cash when you need it.

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