Short Term Money
This is the most common pot of money that people have. Whether you have a cash reserve or not it is highly likely you have some money set aside for future expenditure, most probably because you have an income surplus each month.
You may know what that expenditure will be – a car, a holiday, a deposit for a new home, or university costs for your children. However it is also likely that you’re just setting some money aside for unknown future expenses.
Everything mentioned in the above paragraph is exactly what this ‘Short Term Money’ pot is for.
Ongoing expenditures like food, bills and everyday expenses are normally funded from your regular income.
Anything outside of that, the sort of one-off expenditures, can be funded out of this money.
Because this money can and probably will be spent or invested it is important to retain a cash reserve. This will ensure you always have a cushion, a sum of money that is always there for you.
Separate to the cash reserve the money you hold in this short term pot is most likely to be accessed sooner or later. So saving the money rather than investing would certainly seem to suit. Although for certain longer term objectives such as school or university fees it may be appropriate to consider lower risk investment options.
Once you have set aside what you feel is a comfortable amount in both the short term and the cash reserve pots then the excess money could be invested for longer term objectives.
Read on...Long Term Investments
