Long-term saving is not as daunting as you might think

Long-term saving is not as daunting as you might think
Eileen St. Pierre, The Everyday Financial Planner

Top of the mountainI recently had someone ask me to help her develop a long-term savings plan. She wanted to accumulate $20,000 over the next 10 years for her kids. She did not even think it would be possible. After I broke down the numbers for her, she realized it was possible to achieve her goal.

First, break down your savings goal into manageable actions.

My client gets paid every two weeks. So I showed her approximately how much she needed to set aside from each paycheck. The amount varies depending on how aggressively she invests the money.

  • If she invests at 1% a year (the going rate on savings accounts), she would need to set aside $78 per paycheck.
  • If she invests at 3% a year (in a long-term government bond fund), she would need to set aside $70 per paycheck.
  • If she invests at 6% a year (in a balanced stock and bond fund), she would need to set aside $60 per paycheck.
  • If she invests at 8% a year (in a stock market index fund), she would need to set aside $53 per paycheck.

Make saving automatic.

She can link her savings account with her checking account. Once her paycheck is deposited into her checking account, she can set it up to automatic transfer her monthly contribution to her savings account. By making it automatic, she increases the chances of reaching her goal. Hopefully after a few paychecks, she will get used to having a little bit less to spend and adjust her lifestyle.

Writing down your savings goals helps.

By just focusing on the total amount of $20,000 my client got overwhelmed and thought she could never achieve her goal. Once we wrote down her goals, the path towards achieving the goal got a lot clearer. Don’t be afraid to ask for help. To help you get started, check out these simple saving calculators at:

It is very satisfying watching your money grow. You can do this – I know you can.

Visit my Basic Financial Management page for more information.