How To Choose Your Long Term Savings Goals
Savings, savings, savings. Yes, I’m back again to talk about everyone’s favourite topic savings. And more specifically long term savings goals. For most of us, short term goals like a city break or a new handbag can be pretty easy to achieve. Even if they take longer to save for than you hoped. But long term savings goals over extended periods can be totally different.
Where to put your money for long term savings goals
Unlike a short term goal which you may put into a general savings account, or an instant access ISA a longer-term saving needs to have more thought. As you’re going to be saving over the years, and maybe even decades you want to get the best return on your investment.
Some long term savings accounts offer tax advantages so you can capitalize on compound interest. Compounding interest allows you to earn interest on your interest. For example, you may save £5,000 and earn £100 interest in the first year at 2%. Then in year two, you’d have £5,100 so you’d get £51 interest etc.
The offers on the types of accounts available change all the time but you can choose from:
- A regular ISA – You can save up to £20,000 tax-free in an ISA and some give you higher interest rates if you lock it away for a set period of time
- A Bond- With a bond, you lock your money away for a set period of time in exchange for a higher interest rate
- Stocks and shares ISA- If you’re happy with a little risk you can choose stocks and shares ISA where your money can make a lot more (but you can also lose some too)
- A lifetime ISA- If you’re saving for your first home or retirement you can save up to £4,000 a year in a LISA and get a 25% government bonus. So for each year you save £4,000, you’ll get an extra £1,000
How to choose your long term savings goals
Choosing your long term savings goals can be tricky. But just think in 10, 20, 30 years time where would you like to be and how would you like your life to look. Would you want to own a house, be retired by 50 or living abroad? By naming your goal you’re more likely to hit it as well.
For a lot of people, they’ll know what their goal is. Some people know they want their own house. For others, they know they’d love to go travelling. Or have a family. What you choose to save money on over the long term is totally up to you. And it will be unique from person to person.
For the last few years my longer-term goal has been to renovate our house and we managed to say about £45,000 towards this. Once we move into our house our next main goal will be a new car. And then even longer-term than that it will be our retirement. Even though that’s likely to be 40+ years away now.
How to begin saving
If your long term savings goals have specific monetary values attached to them such as a brand new car which may cost £20,000. Or a house deposit at £50,000 you can start working out how much you need to save. Once you know how much you need, think about when you’d like to achieve your goal. This way you’ll be able to figure out how much you’ll need to save each month.
But make your goal realistic. There’s no point saying you want to have your 50K house deposit in 5 years if you don’t think you’ll be able to save £10,000 a year. It’s a balance between how much you can afford to save and how long you want to save for. If you need help then use the Money Advice Service’s savings calculator.
Once you have an amount decided, set up a standing order for however much you decide to save so it automatically comes out of your account. This way you’re more likely to stick to it.
Longer-term goals you might choose from
While there are lots of things you can choose to save for over the longer term (5+ years) some ideas may include:
- House deposit
- Home renovations (extensions etc)
- Long term travelling
- A second property
- Wedding
- Retirement
What are your long term savings goals?
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23 responses to “How To Choose Your Long Term Savings Goals”
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All About Me
Rhian Westbury
Travels and Destinations
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I’ve got a stocks and shares LISA it’s been hard seeing is plunge this year, but I know it’s all about the long term goal so hopefully it will all pick up again over time.
I 100% agree, if you’re in it for the long term then there’s more than enough time for it to pick back up again x
Rhian, I think you should go and do talks in schools on finance. It’s important lessons like this that will really help children today be ready for their future.
Great advice, thank you for sharing x
Thank you, that’s kind of you to say. Schools and universities is exactly where this kind of thing should be taught so everyone’s more educated x
Some really sound ideas for how to save for the future! After this year, the future just became slightly rockier so it’s definitely wise to invest any spare cash! Sim x
Yeah, this year has shown us all the importance of having a back up emergency fund x
My long term goals are to save the rest of the money for a deposit for a house and towards retirement. It is just knowing where to put the money so this is really helpful.
Some excellent tips and advice, we havent use ISA’s yet but have started lookinginto them, at the moment its a challenge etc with lockdown, so who knows where we will be shortly after xmas.
Yeah it’s such a tough time at the moment, but you’ve got until the start of April to open one and add to this years allocation x
My next long term goal is to buy a second home and I am absolutely loving your tips.
A second home would be an absolute dream, what a great goal to have x
I would really love a deposit for a house but just started saving. Definatly best saving as soon as you can for a long term saving goal
I have never really thought about my long term savings, so I found this post really helpful. Thanks Rhian x
Thanks for opening my eyes to the possibility of earning high interest through various long term savings method. The ISA is something I am not aware of and would love to find out more about.
It’s as much about storing your savings in the right place as to how much you save x
LOVE this post some good solid sound and sensible advice to help people save which is so important in case of emergencies x
I started a savings account with Marcus back in January as they had a high interest rate, and I can’t believe the difference it’s made to my financial situation. It’s something I wish I’d done when I was younger. My goal was to save enough for a family holiday to Crete next year as my kids have never been abroad, and I’m almost at my goal so I booked it the other day. It’s made me so happy 🙂
Louise x
That’s such a nice goal to have, and Crete is stunning. Having that goal in your mind will make saving that bit easier to do x
My husband and I are saving up for retirement. No one wants to be old and penniless, so this has been our financial goal since we married. I will have to share this post with my children. They need to learn how to invest their earnings wisely and consider setting up a long term savings plan.
Once we’ve finished our renovations and gotten married, so maybe 4-5 years, saving for our retirement is going to be my number one goal as well. My partner is self-employed so has no pension and mine aren’t the best so we want to put yourselves in a better position x
We finally started saving for our retirement this year, but have also got a couple of other longer term goals so are looking at the best ways to meet them all.
Congrats on starting to save for your retirement that’s amazing to do alongside your other longer-term goals x
I’m terrible for savings and any kind of planning . I really need to sit down and try and sort it out !