I have to distinguish two types of savings here. You can save for a particular target such as a big trip, wedding or further studies. You can also save for 'the rainy day' or what I would call emergency funds.
One thing about saving for these two categories is that you have to separate where you keep the money. For emergency savings it is better to keep the money where it is easily accessible, like a bank account.
For the nearer - term expenses, because you have a specific time when you will need the money, you can keep it in a different type of account. You need to consider the following:
- Separate accounts: if you are saving money for a particular target or these nearer-term expenses, keep it in a separate account from your regular expenses.
You can also keep it separate from your emergency savings. You don't have to create separate bank accounts for this. You can use Piggyvest app to organize your savings according to different categories.
- Locking the money: Say, you know you should pay your school fees in January 2022 and you happen to have the complete money now, what is to stop you from dipping your hand in to use it for something else?
You can agree with me that there is a need to stow away that money, somewhere that it will be safe and unreachable.
At this point, do not consider using the money to invest in certain long term investments like
stock market. If you invest in stock and that stock goes down over that short period, what will you do?
An app like Piggyvest provides an avenue for you to lock your funds, get the interest paid up front on that money.
The name of the feature on Piggyvest is Safelock. With this feature, you can lock a particular amount for any period you choose and you will not be able to access that money till that period is over.
Okay, you don't trust money apps, another way to lock your money is by giving it to someone you trust, who you know will not release that money till the appointed time. The drawback is that there will likely be no interest with this method.
- Saving daily/monthly : saving up for some of these near expenses can look big if you look at the full amount.
How about you break down your target into monthly or weekly or daily targets?
Your house rent is 300,000 naira. Instead of looking for how to get this amount at once, you can break it down to 25,000 naira per month or 5770 naira per week or 822 naira daily.
If you can target savings at least this amount every day, you can be on your way to having your complete house rent by your next due date.
You can apply this to any other near term savings you need to do over the time period.
Of course when doing something like this, it means you have to keep removing the money from your regular spending account, daily or weekly or monthly.
Piggyvest app can help you automate your savings such that any particular amount you set, will be deducted from your account as frequently as you want.
Do you still have any issue with how to save for a nearer term expense?
Ask away.