6 Types of Savings: When to Begin Each

Getting started can be the hardest thing about saving money.

May 17, 2014 at 1:09PM

Getting started can be the hardest thing about saving money. This may be because the things you save for are often years in the future, and therefore it is difficult to feel a sense of urgency about them.

To make the need to save feel more urgent, here are some guidelines on when certain key types of savings programs should begin.

1. Your emergency fund
The most likely emergency to hit you is the loss of income, so the time to start preparing for that possibility is as soon as you have something to lose. One reason people find starting to save so difficult is that they do not want to give up the spending power they have become accustomed to. Therefore, if you start saving from your very first paycheck, it will seem like less of a sacrifice, since it is hard to miss what you never had. It will take time, but shoot for building up an emergency fund equal to six months worth of expenses.

2. Your workplace retirement fund
Continuing with the principle of not missing what you never had, a good time to start contributing to your employer's retirement plan is when you get your first raise. Set aside a portion of that raise, and all subsequent raises, and you will be saving for retirement without ever taking a step back in available income.

3. Your IRA
An employer's retirement plan is often a better place to start saving than an IRA because some employers make matching contributions, plus a well-run plan may give you access to a more attractive range of investment options than you would be able to get on your own. However, if you reach the point where you max out your allowable retirement plan contributions, the time may be right to save additional amounts via an IRA.

4. Your home's down payment
This process should begin as soon as you start seriously considering buying a house, and the amount you save each month should mimic the amount you would have to put into a mortgage payment. Consider this a dress rehearsal for when you will have to make those payments month after month.

5. Your child's 529 plan
The tax advantage of these education savings plans is based on their investment earnings, so the longer you have the plan, the more you benefit. Therefore, the time to start one of these plans is as soon as you start having kids.

6. Your burial trust
This is money set aside to cover expenses associated with your funeral and burial. A key benefit is that the money in these trusts does not count against you in terms of Medicaid qualification rules -- and going on Medicaid often becomes a necessity for people who have to pay costly nursing home bills. So, a good time to set up a burial trust is if you are thinking of going into a nursing home, so you can put the money aside before your assets have been depleted.

Saving money needs to be thought of as more than of a distant destination. In one form or another, it should be an immediate priority throughout your life. Focusing on when to start as opposed to thinking about when you will be finished saving might just help remind you that the time to save is generally close at hand.

This article 6 Types of Savings: When to Begin Each originally appeared on MoneyRates.com.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it’s not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

You may also enjoy these financial articles:

The best savings account rates: What savers should know

Bank fees: What's the latest?

Money market accounts: A good choice for your IRA?

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers