What is the difference between long-term savings and short-term savings?
Curious about long-term savings
Longterm savings and shortterm savings are two different approaches to managing your money.
Shortterm savings is typically money set aside for expenses that are expected in the near future, such as a vacation, home repairs, or a down payment on a car. The time horizon for shortterm savings is usually one to three years, and the money is often kept in easily accessible accounts such as savings accounts, money market accounts, or shortterm certificates of deposit (CDs).
On the other hand, longterm savings is money set aside for expenses that are expected to occur far in the future, such as retirement, education, or a down payment on a house. The time horizon for longterm savings is typically more than five years, and the money is often invested in vehicles such as stocks, bonds, mutual funds, and retirement accounts like IRAs or 401(k)s. The goal of longterm savings is to build wealth over time, taking advantage of compounding interest and market growth.