By Nicole Bernardo
Major life events, whether anticipated or unexpected, can bring with them substantial costs. As such, thinking and preparing for these occasions or milestones well in advance is crucial to ensure that you can remain financially stable. However, with so many possible things to save up for, it can be challenging to decide on what to prioritize. To help narrow things down, this article will explore some of the big expenses you’re likely to encounter in your lifetime and offer some strategies on how to start saving now.
Emergency Funds
Life is unpredictable and unforeseen circumstances such as medical emergencies, car breakdowns, or job loss can happen at any time. This makes an emergency fund essential, ensuring that you’re financially covered without resorting to high-interest loans or dipping into long-term savings.
To start saving for your emergency fund, begin by setting a specific savings goal based on your monthly expenses. Many financial experts recommend that emergency funds should be at least three to six months’ worth of one’s living expenses but the overall amount may depend on your unique situation and financial capabilities. Next, allocate a portion of your monthly income towards building your emergency fund until you reach your goal. You can also look for ways to cut unnecessary expenses and redirect those savings into your emergency fund. Even small amounts saved regularly can quickly accumulate and contribute to financial security.
You should also consider saving your emergency fund in an account that offers high interest rates so that it can earn more. Time Deposit Plus by Philippine fintech company Maya, for instance, starts with a base rate of 3.5% p.a. This is significantly higher than what many traditional banks offer. The interest rate can also be increased when you hit your target amount and term, which further boosts your interest rate. Moreover, this time deposit product allows you to cancel your account anytime—even before your due date—with a minimal cancellation fee. As such, you can receive the amount you’ve saved when you need it and without hassle. This is particularly crucial when faced with a financial emergency. Maya also offers other high-interest banking products like Maya Savings and Personal Goals.
Retirement Fund
Retirement funds are essential to maintain your standard of living after you stop working and while Social Security benefits provide you with an assured monthly sum when you reach a certain age, the amount may not be sufficient. As such, supplementing your benefits with investments and personal savings is an excellent way to increase your retirement nest. If you want to maximize these assets, however, you need to plan for them early to allow your investments to maximize compound interest. This will significantly increase your retirement nest egg over time.
You should also think about incorporating pension plans into your retirement strategy. Typically provided by employers, pension plans offer a defined benefit upon retirement based on your salary and years of service. If your employer offers one, make sure to understand how it works and how it fits into your overall retirement plan.
Mortgages and Home Loans
Buying a home is a significant milestone but it comes with considerable costs beyond just the down payment. Monthly mortgage payments, property taxes, insurance, and maintenance expenses can add up quickly. Planning for these expenses today can help you avoid financial strain in the future and ensure that you are prepared for the responsibilities of homeownership.
To start saving up for your future home, first create a budget to determine how much you can afford for a down payment. Once you have an amount in mind, aim to save at least 20% of the home’s purchase price to avoid private mortgage insurance (PMI) and secure better loan terms. You can also work to improve your credit score by paying down debt and maintaining a good credit history, as this can help you qualify for better mortgage rates.
Vehicle Purchase
Whether you’re buying a new or used car, the cost will definitely be more than the initial purchase price. You also have to include insurance, maintenance, fuel, and potential repairs in your expense computations. Saving for your car in advance can help you manage these costs more effectively and avoid financial stress. The first step is to determine how much you can save for a vehicle by evaluating your current financial situation. This way, you’ll have an easier time deciding how much you can afford to spend on a car. Next, aim to save a substantial down payment to reduce your loan amount and secure better financing terms. You should also open a separate savings account specifically for your vehicle and make sure to contribute to it regularly.
It also helps to research vehicle options within your budget so that you can keep your savings process realistic. Consider factors like fuel efficiency, reliability, and insurance costs, as well as ongoing vehicle expenses like maintenance, to ensure that you’re prepared for car ownership.
Education Costs
Planning for your or your children’s education is a significant financial responsibility that can impact your budget for years to come. Tuition fees, books, and other expenses associated with education can be substantial and often increase over time. Thus, to help alleviate financial pressure and ensure that you have the resources needed to help your child pursue their education, you need to plan ahead.
Begin by estimating the total amount needed based on the type of education and the institution. Next, place your savings in a dedicated savings account or investment account that offers tax advantages for education expenses. If you’re saving for your own education—like a postgraduate degree or certification courses—consider applying for scholarships, grants, or financial aid. These can significantly reduce the overall cost of your education.
Planning for significant future expenses is crucial for maintaining financial stability and achieving long-term goals. By preparing for the major life events mentioned here, you’ll be ready for the financial demands of tomorrow.
