Important beginner’s guide to saving

Important beginner's guide to saving


If you’re like me, you’ve been told to save money since you were young –– whether by parents, guardians, teachers, or even mentors. You might have even had a cute little piggy bank or maybe a special box you carefully collected your earnings. 


The definitions of long and short are relative, but short-term savings is typically money you’ll spend six months to three years out, and long-term savings is usually the money you won’t touch for more than three years.

  • Emergency fund.
  • Payments toward rent, insurance or student loans.
  • Credit card debt payments.
  • Personal goods.
  • Travel.
  • Wedding.
  • Minor repairs and home improvements.
  • Low-cost medical emergencies and procedures.

How much should be in short term savings?

Most experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months’ worth of living expenses.

What does long-term savings mean?

The definitions of long and short are relative, but short-term savings is typically money you’ll spend six months to three years out, and long-term savings is usually the money you won’t touch for more than three years

Examples of Long-Term Savings

  • Buying a car.
  • Major home renovations.
  • Retirement goals.
  • Large medical bills and expensive procedures.
  • Savings in case of a job loss.

How much should be in long-term savings?

Here’s a final rule of thumb you can consider: at least 20% of your income should go towards savings. More is fine; less may mean saving longer. At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items.

What are the benefits of saving long-term?

One of the major benefits of long-term saving is the ability to make substantial gains through compound interest. “Simple” interest is calculated on the original amount of a deposit. But compound interest is calculated on this amount and also on the accumulated interest of previous periods.

We know that it’s good to save money, especially if we want to buy things. Growing up, those things might be concert tickets or a new pair of shoes, and as we get older it’s vacations and weddings and houses (and tbh, still sometimes a pair of shoes and concert tickets). 

We’re not always given the best guidance though on how to save for the things we want, so here’s a quick guide to saving to help you build the best plan for you and your money.

Timelines matter

Before we get started on the methodologies behind savings, it’s important to remember that timelines are individual. You are not bound to anyone else’s life choices, and you can decide to take a different path than the one you’re expected to follow.

Just a few years ago, my biggest goal was to save $100,000 by age 25. I thought that I would be doing that and climbing the corporate ladder –– and I did save my $100K, but soon realized that corporate was not for me. This changed my timeline and my goals and that’s OK!

I share this because we humans are mercurial –– the only constant in life changes. We change and grow as new opportunities are presented to us. The best thing we can do for ourselves is check in and make sure we’re following the life path we’ll be proud of when we reach the end of the road.

Alright, philosophical Tori is leaving the building –– let’s get into the most effective ways to save money!

What do you really want?

Right around the time you start to settle in post-college or a few years into your career, you start to notice just how much of your paycheck is going to rent. You might start thinking “is it time to buy a home?” or “am I wasting money on rent?”

There are about 100 other examples of “should’s” you can trade out in this scenario. Is it time to start investing? Should I start saving for a wedding? Should I be saving for a vacation? A new car?

With social media keeping us so connected and aware of what others have (and don’t have), it’s easy to slip into the mindset that you’re lacking something. Most of the time, we don’t interrogate those thoughts too much, because it’s easier to just “go with the flow” than to actually figure out what it is we really want.

So here’s my question: what do you really want?

Do you really want to buy a house? Just because all your friends are spending their weekend weed whacking and cosplaying Chip and Joanna doesn’t mean that’s all there is for you.

Do you REALLY want to spend $40,000 on a wedding? Or do you feel like you have to invite everyone you (and your parents) have ever met because it’s what’s expected?

Do you actually want to buy a brand new car? Or are you just self-conscious about your 2008 Honda Accord that’s seen better days?

It’s totally OK if you answered yes to any of these questions. Just remember this is your one precious life, and you get to decide what actually matters to you.

A helpful and effective way to save money is the classic pro-con list, especially one that factors in the future. What will you have to give up to save for whatever it is you feel you need to save for? Is that worth it?

At the end of the day, only you know that answer.

Where should you keep your savings?

So now that you’ve decided what you’re saving for –– where should you keep that cash?

Timeline: 0-2 years

If you anticipate needing to hack into your savings anytime in the next three years (this includes an emergency fund), I recommend keeping this cash in an HYSA over a regular savings account. There are no penalties for withdrawing (unless you’re doing it several times a month), and your money will grow at a faster rate 

Timeline: 1-7 years

If you’re planning a vacation, saving for a down payment, or other life events that will occur sometime in the next 1-7 years, you may want to consider a CD (otherwise known as a certificate of deposit). These accounts are offered by most banks, and have a higher interest rate in exchange for the requirement of leaving the funds in place for an agreed-upon amount of time (ie; 18-months).

These are NOT the best accounts to use for emergency funds since you need to be able to access those quickly and without penalty when an emergency occurs. Make sure you read the full terms and will be able to keep that cash in place for the duration of the set term.

Timeline: 7+ years of Retirement

If you are saving for something at least 7 years out, it might be time to consider investing it. No HYSA will ever be able to touch the rate of returns that the stock market will give you, especially over a long period of time. A traditional brokerage (not retirement) account is a great place to start!

If it’s retirement you’re saving for, then you DEFINITELY need to consider a retirement account like an IRA. Keep in mind, with retirement accounts like IRA’s and 401K’s, you will pay a penalty if you withdraw them before a certain age (currently 59 ½).

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