Saving for your short-term financial goals

Quick insights

• Short-term financial goals are typically objectives that you want to achieve in three years or less. 
• Examples of short-term financial goals include saving for an emergency fund, paying off credit card debt or saving for a down payment on a car. 
• Following a budget may help you determine how much you can contribute to funding your short-term financial goals. 

Financial goals can take many forms. They may range from paying off a few hundred dollars of credit card debt to saving for retirement.

If you have different types of financial goals, thinking of them in terms of their timelines can help you with planning. Short-term goals are one type of financial goal that you may want to plan for.

In this article we’ll talk about short-term goals—what they are, why they can be important and how you can save for them.

Reasons to consider short-term financial goals

Short-term goals might play an important role in your finances and financial outlook. Having short-term goals often involves creating savings for planned and unexpected expenses or paying down debt.

These goals are often tied to financial objectives that are typically three or less years out. Examples of short-term savings goals include:

• Building an emergency fund
• Saving for a wedding
• Paying off a credit card
• Saving for a down payment on a car
• Making home improvements and upgrades
• Paying down your student loans

Short-term goals can also be part of a savings plan. In addition to short-term savings goals, a savings plan may also account for:

• Medium-term savings, which have a duration of three to seven years. For example, saving for a down payment on a home.
• Long-term savings, which feature goals that you’d like to achieve in more than seven years. For example, saving for retirement.

Budgeting and short-term goals

How long it takes to achieve a short-term goal will depend on the dollar amount tied to the goal and how much of your income you can put toward your goals. Creating a budget that includes putting aside money toward financial goals every month may help you determine how long it will take to reach the goal amount.

Having specific, measurable and realistic goals may help you set and achieve them. For example, you may have a goal to pay off credit card debt. To plan for this goal, you may want to:

• Identify your goal: paying off a credit card
• Identify the cost of your goal: $2,000. 
• Identify your timeline for your goal: One year
• Calculate how much to save each month and apply it to your savings plan: $166.67

Budgeting may allow you to see how much money you can realistically put toward your short-term goals. If you have multiple savings goals, you may take the approach of putting more towards your highest priority goal or goal with the shortest timeline.

Adapting to changes in your short-term goals

Periodically reviewing your goals may help you more quickly adapt to changes in your income, expenses or priorities. 

Your priorities or financial outlook may shift over time based on emergencies or lifestyle changes. For example, saving for a down payment on a car may become increasingly important if your car starts to routinely break down and require more maintenance.

Conversely, you may find that a financial windfall could change your short-term goals. It can be helpful to adjust your short-term goals when unexpected money—like a bonus, overtime pay or a tax refund—comes your way.

Places to keep your short-term savings

Having a savings account that is dedicated to individual short-term goals may help you stay motivated and accountable. When all of your savings is in one account, it may be harder to see how much you’ve contributed to any one savings goal. Multiple savings accounts that are tied to individual short-term goals may provide an easier way to determine how close you are to reaching your goal.

A high-yield savings account (HYSA) may provide a useful way to save for short-term goals. Financial institutions offering HYSAs are often online, can sync to savings and checking accounts at traditional banks and may provide a higher-than-average interest rate. Transfers to and from HYSAs typically take a couple of days, so plan accordingly when withdrawing from or depositing money into these accounts.

In summary

Short-term goals are one part of a savings plan. These goals are typically financial objectives—like saving money or paying down debt—that you plan to fund in three years or less. Common short-term goals including paying off credit card debt, saving for a wedding or creating an emergency fund.

Having a budget may help you determine how much you have to put toward your short-terms goals. Your goals can change over time, so it may be helpful to periodically review them, especially when your income or priorities shift.