How to reach your short-term savings goals

There’s a lot of advice out there about how to save for lofty, long-term goals like retirement or your child’s education, but short-term savings goals deserve your attention, too.

While savings goals like weddings, vacations, and home renovation projects tend to be smaller in scope, they can have a big effect on your happiness. From boosting your financial health to easing financial anxiety and stress, there are plenty of advantages of saving for short-term goals—but one of the biggest benefits of saving for your goals is it helps you avoid going into debt. If you can effectively set aside money to pay for that dream vacation in the Caribbean, you’ll avoid taking on any debt, which can stay with you for years after your sunburn fades away.

So, how do you save for short-term savings goals? Andy Hill, Family Finance Coach with Marriage Kids and Money,  recommends creating a plan and sticking to it. Here are some tips and strategies aimed at helping you set and hit your short-term savings goals.

What are short-term savings goals?

Short-term savings goals are financial targets that take you less than three years to hit, says Michelle Schroeder-Gardner, founder of the personal finance blog Making Sense of Cents. The biggest difference between short- and long-term savings goals is the time frame, but there are other differences as well. Short-term savings goals aren’t for immediate expenses like groceries or utility bills, but they also don’t require as much planning and saving as long-term goals like your child’s college tuition or your retirement. Rather, they’re personal finance goals you want to reach in the next few years.

What are some examples of short-term goals? Vacations, home renovations, weddings, and emergency funds can all be short-term savings goals.

Why is it important to have a plan for saving for short-term goals?

Short-term savings goals are easier to meet when you have a plan in place.

Hill says that saving for short-term goals without a plan is like trying to have a productive workday without making a schedule: At the end of the day, you might find that you didn’t get everything accomplished that you needed to. “In the same way, you can find yourself lost if you spend your money without a budget or a plan,” he says.

Schroeder-Gardner agrees. “It can be tempting to spend your money on other areas instead of saving for your short-term goals, so having a plan is important,” she says. 

So how do you save for short-term savings goals? Like the experts say, it starts with a plan.

Below, Hill and Schroeder-Gardner share their tips and strategies for short-term savings success, plus offer some common pitfalls to avoid.

How to create a savings plan for your short-term savings goals

When you’re creating a plan for a short-term savings goal, whether it’s to build up an emergency fund or to pay for your wedding, you should start by answering a few questions.

Where will you put your short-term savings funds?

Creating a separate savings account, away from your everyday checking funds, is a smart idea, Hill says.

Giving your savings fund its own account will help check your temptation to spend the earmarked money on other purchases, he adds. Both Hill and Schroeder-Gardner recommend opening a high-yield savings account to maximize the growth and safety of your savings.  Schroeder-Gardner says the advantage of a savings account is that you can easily make withdrawals and also “earn some interest without taking on high risk.”

In addition to high-yield savings accounts, money market accounts and certificates of deposit (CDs) are other options for storing your funds.

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To make the savings process easier, Hill says that you could also choose to use direct deposit to send portions of your paycheck into both your checking account and your savings account. When you automate your savings, Hill says, the money stays “out of sight, out of mind” until you’re ready to withdraw it for your short-term savings goal.

What’s your time frame?

Before you embark on a short-term savings plan, you should determine when you want to hit your goal. Are you saving for a vacation occurring nine months from now? Or are you hoping to make the down payment for a new car in two years’ time? Knowing your time frame gives you an idea of how much you need to save each month to meet your goal.

Schroeder-Gardner offers some advice: Don’t take on too many savings goals at the same time.

“Some people may not benefit from having too many savings goals all at once, as it can be stressful and you may find it hard to stay motivated,” she says. “But, if you are able to, then the earlier you can start saving, the better.” 

How much should you save each month to meet your goal?

Once you know the entire amount you need to save for your overall goal and how long you have to do it, determining your monthly savings target just takes a little math. For example, if you want to go on a $3,000 family vacation 10 months from now, then divide $3,000 by 10. It’s clear that you’ll need to save $300 each month to meet that goal.

If you’re reviewing your budget and not seeing where that money will come from, Hill and Schroeder-Gardner have ideas. First, look for expenses you can cut to free up more cash for your goal. Not seeing any? Hill says to consider negotiating some of your current bills, such as insurance, phone service, or cable. Next, think about ways to make time for a side hustle. The more money you have coming in, the easier it will be to save for both short- and long-term savings goals.

Avoid these mistakes on the way to your short-term savings goals

Even though the amounts tend to be smaller, short-term savings goals can feel harder to reach than long-term ones.

“When you have a short amount of time to save for something, it can be hard to stay motivated or to stay on track,” Schroeder-Gardner says. “This is because other expenses may come up, or you may feel that you have to save too much money in a short amount of time.”

Any way you can avoid impulse spending to save money can help keep your plan on track.

Whether it’s a meal out or a new outfit, impulse buys add up and can waylay your short-term savings goals. They can also drag you into debt, which is the opposite of where you want to be when you’re saving for a short-term goal.

“It’s in our nature to be a little impulsive about the things that we want,” Hill says. “If we act on those impulses, that’s unfortunately how people get into debt.”

One of the best ways to stop overspending on impulse buys is to make a budget and stick to it.

Some expenses, however, can’t be controlled with a budget. Unexpected medical bills or car repairs have to be paid for. While these unforeseen expenses can be deflating when you’re trying to save for a short-term savings goal, they won’t have to set you back if you already have an emergency fund and know when to use it.

How to stay motivated as you save for short-term goals

Keep your end goal in mind, Hill says. Make the advantages of saving for short-term goals visual: Whether it’s your dream wedding venue, vacation destination, or a new car, print out a photo that illustrates your short-term savings goals and put it where you’ll see it every day. You could also make the image the background of your computer or phone. Or try creating a financial vision board with images that will help bridge the mental gap between your finances and your goals. That way, you’ll know exactly what your short-term savings goal is and why it’s important to you.

To track your progress, Hill recommends creating a simple bar chart. If you have kids, stick it on the fridge to show them how it’s going and get them excited. One of the advantages of saving for short-term goals as a family (or planning a family budget) is that it teaches kids fundamental financial concepts at a young age. “They’re seeing, ‘Oh, I can’t just buy or get what I want right away—I actually have to work toward it and save up,’” Hill says.

Looking for more tips for hitting your short-term savings goals? Learn how multiple savings accounts might help you grow your money and reach your goals.  

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