By Victor Villegas, Union Bank, N.A., Senior Vice President and Regional Manager
Sharing special events with family and friends is important and such events and occasions often come with a hefty price tag. Whether you want to save money for an around-the-world vacation, milestone birthdays, a wedding or baby, take some time to establish a savings plan for financing these special moments so it won’t cost you more in the long run.
Develop a course of action after you’ve considered these steps to help you start saving for year-round expenses and special events:
Set a savings goal and deadline
Determine which events in the foreseeable future will require extra money, and then spend some time determining how much you will need to set aside to pay for them. For back to school items or holiday expenses, review last year’s statements to get an idea of how much you spent on these items the previous year. If you are planning on taking a vacation this summer, start looking into airfare and hotel rates now. Larger, more costly events, such as a wedding or the birth of a child, may require more time to plan and save, so determine how aggressively you’ll need to save based on your timeline and try to give yourself as much time as possible to put money aside.
Budget and prioritize
Once you know how much you need to save, determine how much you must set aside each month in order to reach your savings goal by your deadline. Establish a budget that includes a line item for the occasion you are saving for and pay into it as if it were a credit card or other important bill. Consider setting up a targeted account in which to stash money for your special occasion. You might find it helpful to set up an automatic transfer or have part of your paycheck deposited into the account every pay period or monthly.
If you find that you don’t have extra money to set aside toward your goal, it may be time to review your priorities. Look for ways to cut back on your regular spending, or look for opportunities to bring in some additional cash. If you are saving for a honeymoon, put any monetary gifts toward your goal. If you are expecting a baby, consider asking family and friends to contribute to a 529 savings plan to kick start a college fund in lieu of baby clothes or toys. If you are still coming up short, then perhaps you can scale back on the amount you originally budgeted to spend on the event or occasion.
Grow your Money
The most important ally you have in reaching your goals is time, and money put away in high-yield savings accounts or invested in stocks and bonds can grow and compound over time. Shop interest rates to find the highest yield for savings accounts, certificates of deposit (CDs) or money market funds. The type of account to best meet your needs will depend on the length of time you have to reach your financial goal, so make an appointment with your banker or financial advisor and seek guidance about how to invest and save money.