Did you know that half of all Americans do not have any money saved for retirement? I read this statistic the other day and it made me so sad. Long term savings is so important, but also one of those things that is easy to put off until “next year.” The future often looks so far away, it’s hard to remember to plan for it immediately.
The truth is though, that the earlier you you begin to save for the long term, the more money you will have and the less stress you will feel. If this is something you haven’t been making a priority yet, I encourage you to make it a priority now.
Long Term Savings are for life events within the next 5 or more years.
A few reasons to save for long term is:
-Buying a house
Here are my 3 easy to implement steps to saving for your long term goals!
1. Make a Plan
Write down what you want to save for. Do you want to retire at 55? Pay cash for your kids to attend college? Travel the world? Write it down and write down your best guess of how much money you will need saved. This might take some research, but the time and effort is well worth it in the long run!
I like to use the free online retirement calculators to help give me an idea of how much money I will most likely need. I recalculate these numbers every few years to make sure we are on the right track.
To decide how much money you need to save for college, simply average the cost of the three most likely schools your children will attend. This gives you a good rough estimate to shoot for.
2. Invest and Save
Now that your plan is made it’s time to start saving. This is the fun part!
For shorter term savings you would want to save into a high interest savings account or a CD. Because we are talking about long term savings I recommend saving through investing.
Aim to save 10-15% of your paycheck into a retirement account. The best place to start saving for retirement is in a 401k or ira.
If your company matches your contribution into a 401k (this is usually a fixed percentage) take advantage of that match! For example: If your company offers a 3% match, contribute 3% into that account. This gives you free money! Take advantage of it from the very moment you begin working.
A good investing options for college savings is a 529 plan. There are a few different plans you can choose from. We like to be more aggressive when the kids are young and then change to more conservative as they grow.
You might find it beneficial to meet with a financial adviser to set up your investment accounts. Our financial adviser has been so helpful in answering our questions and pointing us in the right direction.
I also highly recommend setting up automatic contributions into these accounts so that no matter what the money is being saved and invested.
3. Use Time to Your Advantage
Time is your very best friend when it comes to long term savings. The sooner you begin to save, the more your money will grow. Through smart investments your money will grow not only on what you save, but also on the interest you are receiving.
It’s important to be patient when investing. The stock market will rise and fall over time. The best practice is to leave your money in the market through the ups and downs rather than pulling it in and out. Use time to your advantage!