How to use your short-term savings?

Many people overlook the need to have short term savings. That is why when their car overheats, their refrigerator breaks down and when they find out that they have run out of groceries, they worry to death about how they are going to be able to afford the costs. Yes, they can use their credit cards to pay for the emergencies but how will they be able to pay them off? Not having short term savings can leave you eating peanuts and can leave you with a ruined overall financial health. Short term savings is usually the emergency fund. However, they can also be used to achieve short term goals such as planning a vacation, buying brand new shoes or updating your wardrobe. Listed below are some of the numerous benefits of having short term savings.

1. You will be able to recover immediately from a financial setback- People who struggle to make ends meet live on edge financially. They are worried about getting sick, their car breaking down, etc. Thus, when they are faced with a problem that causes a financial setback, they panic and break down. If you have short term savings, they will serve as an emergency fund which can help you cover the expenses when there is an emergency—allowing you to recover and get back on your feet immediately.

2. Having short term savings will allow you the help others who need your help- Nobody said that short term savings should only be used for your own emergencies. When somebody asks for your help, it would be devastating not only for them but for you as well to know that you cannot offer your help. However, if you have short term savings, you can immediately assist and offer your help.

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Allows you to be prepared for unexpected events- Life is unpredictable and even if you feel like your life has turned to be a routine, you can expect that life will surprise you. In one way or another, there will be times that something will go wrong, and if you aren’t prepared for it, it might cost you your financial health and reputation.

4. Having short term savings help improve relationships- Money can’t buy people and relationships, but most relationships which end up failing were in constant financial pressure. If you have an emergency set aside, you can secure your relationships with the people you love. In general, when people are worry-free, they are much easier to be around.

5. You can make better decisions- When you are pressured and stressed out, you will end up making hasty decisions that most probably would turn out to be wrong ones because of the clouded judgment. But if you have short term savings, you can be worry-free which will allow you to make decisions without distractions.

6. You can enjoy what you do- When you are financially stressed out, you will be more likely to drag yourself to work and be cranky while doing it. What’s worse is some people even decide to work jobs they do not like just to be able to support their necessities. But if you know that you are financially secure, you will have the flexibility to choose and land the job that you will surely love.

7. Having an emergency fund protects your investments- When people experience a financial crisis or setback and have no emergency fund to cover it, they usually tend to take some money out of their investments. Investments are important as they secure your future thus, it is never recommended to touch it. Therefore, for you to be able to save your investments, you need to set aside an emergency fund which you could use to cover your financial crises.

Short term savings or emergency fund should be kept in places or accounts where you have easy access to. Financial advisers suggest that people have at least 3 to 6 months worth of their salaries in their emergency fund to make sure that you can afford your necessary expenses in the event of losing your job or experiencing a major financial crisis. There are different short term savings options available where you can choose to invest your money in. You can either deposit them in the IRA or in a bank account which offers a high interest rate. Get your credit score checked regularly so you can choose how much and where you should invest your savings accordingly.

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