October is Financial Planning Month, making it a great time to take a closer look at your financial goals and how you’re working toward them. One of the key things to consider when planning your finances is timing. How soon you’ll need the money for a goal—whether over a few months or several decades—should shape how you save or invest. This is called your time horizon, and it plays a major role in determining the best strategy for reaching your objective.
In this post, we’ll break down some common financial goals, savings tips, and discuss how you can tailor your savings strategy to fit your time frame. That way, you’ll be better equipped to grow your money wisely.
Short-term goals usually involve things you’ll need money for within the next few years. Think of building an emergency fund, saving for a vacation, buying a car, or covering a medical expense. Since these goals are coming up soon, you want to focus on saving strategies that are low-risk and keep your money accessible.
When it comes to short-term goals, your number one priority is keeping your money safe. You're not looking to make a huge return; instead, you want to make sure the cash will be there when you need it. Here are a few types of savings accounts that work well for reaching short-term goals:
The main idea for short-term savings is to keep things simple and safe. Since you'll need the money soon, it's all about liquidity - making sure you can access your cash without losing value. Tools such as online banking and debit cards can help make these funds accessible for when you will need them.
Medium-term goals cover things that are still a few years away, like saving for a down payment on a house, paying for a big wedding, or setting aside money for a big home project. With a bit more time on your hands, you can afford to explore strategies that offer a higher return while still managing risk.
Since you have a longer window before you need the cash, you can aim for a balance between growth and security. You don’t want to take on too much risk, but you can look for options that give you a better return than just a savings account. Some good choices include:
Flexibility is key when saving for medium-term goals. You want to give your money a chance to grow while protecting it from major market swings.
Long-term goals are your big-picture financial plans: things like saving for retirement, building a college fund for your kids, or creating a large estate. Because these goals are so far away, you have a lot more time to take advantage of the potential for growth.
The longer your time horizon, the more risk you can afford to take on, which means you can aim for strategies that offer higher returns. Even though there's more risk, the idea is that over a long period, the market will generally grow. Here are some options to consider:
With long-term goals, the focus is on growth. Since you have plenty of time, you can afford to take more risk in exchange for the potential to build significant wealth.
Planning for retirement and long-term investment goals can be complicated. American Heritage’s Investment & Retirement Center (IRC) can provide the guidance and services you need. Your IRC representative will listen to your needs, review your goals, and make recommendations.
While it’s important to match your savings strategy to your time horizon, it’s equally important to revisit your plan regularly. Life changes, whether it’s a new job, starting a family, or an unexpected expense, can shift your goals and time horizons.
Make a habit of reviewing your financial plan at least once a year to ensure you’re still on track. Ask yourself:
By staying flexible and adjusting your strategy as your life changes, you can keep your plan working toward your overall financial success.