When you think of
savings, it’s easy to think of putting money aside for several purposes in one
bulk. However, according to financial experts, when it comes to proper savings,
there are several kinds of this form of financial discipline.
Largely, these
various types of savings are categorized based on the purposes they cater to
Long-Term Savings
As the name implies,
long-term savings serve long-term purposes and so, usually last for a long
period of time.
Long-term savings
are savings designed to mature over a long period of time too. Usually
depending on the type of account, you operate or the system an e-commerce
platform operates, one may or may not have certain restrictions to withdrawing
the said funds.
It’s important to
keep in mind the interest rate your long-term savings account will yield as
well as be mindful of making withdrawals before the maturity dates set for the
account. The latter usually comes with implications such as a cut on interest
rates. Another important factor to keep in mind is comparing interest rates of
several savings accounts to be on the winning side of getting the best interest
rate in the market.
You definitely need
to pay attention to the fees a long-term savings account will incur because
these fees could bite your savings in the butt and rip off every interest
acquired.
Emergency Fund
Just like the
preceding type of savings, an emergency fund as its name implies is an account
set up for emergency situations. Think of the unexpected things that could
happen to a person such as; falling ill, losing a job etc, this account takes
care of these kinds of emergencies.
In non-financial
terms, think of Emergency Funds as life jackets which help a person stay afloat
during an emergency situation or unforeseen circumstances.
If you’re uncertain
on the percentage to pull from your income to fund this saving, it’s best you
go after a financial advisor to put you through.
Short-Term Savings
Short -term savings
are funds designed to stay in an account for a short period of time. Usually,
funds which last within 6 months to three years, are considered to be
short-term savings.
Recurring Expenses
This is almost
similar to emergency funds but for expenses which always come up. Think of
gifts for a family member’s birthday, gifts during holidays etc.
This savings type is
referred to as recurring because they’re always coming up.
Splurge Or Just For
Fun Savings
This is a savings
set aside for fun stuff. It usually consists of leftover savings a person set
aside to attend to fun activities like shopping during Black Friday, buying
that phone you’ve always wanted etc.
Remember that as a
general rule when saving, certain percentages of a person’s income should be
properly drafted out to go into these various types of savings. Again, it is
very important to consult a financial advisor or a person’s account officer for
financial advice.
It is also important
to note that savings is a habit which has to be cultivated and improves over
time.
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