New sports car
- Type of savings goal: Short-term
- Cost: $6,000 (20% down payment on a $30,000 vehicle)
- Best place to stash your cash: High-yield savings account
Maybe you've been yearning for a shiny new sports car. The model you've had your eyes on will be released next year, and you'd love to snag a Labor Day deal. All you have to do is save the down payment over the next year. A $6,000 down payment spread over 12 months comes to $500 a month that you'll need to sock away.
Since you'll need to access that cash fairly quickly once your new car hits the market, it's best to keep your money in an easily accessible account. A high-yield savings account can give you the liquidity you need while providing you with a little accrued interest at the end of the year to splurge on some fuzzy dice for your mirror.
- Type of savings goal: Medium-term
- Cost: Around $4,000
- Best place to stash your cash: Money market deposit account or CD
You and your spouse have been together for seven loving and fulfilling years. So when the big 1-0 eventually comes around, you want to splurge on an island cruise.
When factoring in the cost of each cruise ticket, airfare to and from the port, food, drinks, excursions, and other travel expenses, that vacation will easily cost $4,000 or more. Fortunately, you have three years to save for it.
One of the best ways to save money you won't need to use for the next few years is in a certificate of deposit (CD). CDs allow you to lock in your savings for a set period of time for higher interest than a traditional savings account — the longer the term, the higher the interest rate.
Here's how it works: Let's say that right now, you have $1,000 to set aside. You open a three-year CD and deposit the money. A year from now, you've saved up another $1,000, so you put that in a two-year CD. The following year, you deposit a final $2,000 into a one-year CD. Three years from now, those three accounts will all mature and you'll have your $4,000, plus interest. Buy yourself a nice bottle of wine to bring on the ship!
Vacation home at the lake
- Type of savings goal: Long-term
- Cost: $50,000 (20% down payment on a $250,000 home)
- Best place to stash your cash: Brokerage account
When it comes to major purchases such as property, most people don't have the cash on hand to buy right away. Instead you could invest in the market with a strategy designed to maximize your returns over a long-time horizon.
You definitely don't want to sink 100% of your savings into one company's stock, but the longer your savings horizon is the longer you have to leverage more diversified investments. For example, index funds or mutual funds can perhaps earn better returns, depending on market performance.
For example, say you have $10,000 to invest now. Then you invest another $1,000 a year for the next 15 years. Though there's no way to guarantee how much you might earn (or lose) in the stock market, history shows you can expect 7% a year in returns, on average.1 By investing over the long-term, you can ride out market ups and downs. So in this example if you plug these numbers into this calculator,2 you could have as much as $52,719 ready to put down on your vacation home overlooking the lake.
Talk to a professional
There's nothing wrong with enjoying the money you worked so hard to earn. However, every person's situation is different, so it's best to come up with a customized savings plan with the help of a professional.
Talk to a Synovus representative to learn how you can fit a backyard pool, convertible sports car, dream vacation, or a second home into your overall financial plan.