Let’s talk about short term vs long term saving
Saving is a great habit to get into. Whether you save a few pounds or a couple of hundred each month, it all builds up and will no doubt come in handy in the future.
Short term savings
Saving for the short term can mean you have a small pot of money to fall back on should you need it. For example, if you own a car, you know that a service and MOT have to be completed annually, but if you’re not planning for it then the cost can take you by surprise and finding the cash to fund it at the last minute could be tricky. A car MOT usually costs £54.85 and the average car service costs £125. If you saved £15 a month for 12 months, you would have enough in savings to cover the cost of these. Having savings to fall back on means you are less likely to need to turn to short term credit, leaving you in control of your finances. Easy access savings accounts are commonly used for people saving short term as it means you can access your money as and when you need it, ideal for when unexpected costs arise.
Long term savings
Long term saving can sound more daunting than short term saving. It may mean saving for a larger financial investment, such as a house or your child’s education. Long term can be defined as something you plan to do at least 5 years into the future. Many people are already saving for the long term by saving into their retirement fund. Building up your pension pot could be overlooked as a form of saving due to you not being able to access the money for a while. However, some may argue that it is the most important thing to save for. Unbiased recommend that a pension pot of around £100,000 is a reasonable amount. This figure can sound intimidating, but the sooner you start saving into your pension, the better!
The average Brit saves around £105.43 a month according to yourMoney. If you were able to save this for 12 months, you would have saved up a total of £1,265.16. This could be used to fund Christmas, a holiday or just give you peace of mind knowing that you have your own money to use if needed. If you’re looking to save long term, that £105.43 you save each month would be a whopping £10,121.28 if you saved it for 8 years, plus you would also get any interest or dividends if applicable!
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