Build Up Your Short-Term Savings…For Real This Time

PTs Quick Guide to Truly Saving More

Download this PDF below.

Today I’ll share with you my thoughts on how and why you should build up your short-term savings. In my opinion, saving is the life blood of any good financial plan. Your ability to save has the biggest impact on your ability to get ahead financially and have success down the road.

If you can master this one thing (saving) then you’re going to be in a better position that most people, regardless of the other financial moves you make. This is truly the most important takeaway. Let me give you 3 reasons why it’s important to save:

Reasons to Save More

1. Life’s Emergencies

Unless you have some sort of magical insurance policy that covers everything, you’re going to run into the occasional emergency, or at least an unexpected expense that you can’t pay for with your regular monthly income. Short-term savings can act as an emergency fund against life’s unexpected turns.

For instance, you might experience a job loss, and your primary source of income is temporarily suspended. If you had a bit of savings built up, you could meet your monthly expenses and at least temporarily weather the storm. Read more about how to save for emergencies.

2. Your Major Planned Expenses

But there doesn’t have to be an emergency to justify the need for short-term savings. Think of a vacation you’ve been wanting to take, or maybe an upgrade to your home you’ve been wanting to make. How are you going to pay for these bigger expenses?

The best way is to save up the money for these expenses over time, prior to when you actually need the money.

Instead of saving first though, we often decide to finance the planned expenses on debt. That leads me to my last reason saving it so important.

3. Avoiding Debt

Without savings, we typically turn to debt to get us by when the unexpected happens. Financing an emergency or a major expense on credit can be costly. Interest charges alone can quickly turn a moderate purchase into a big mistake. Debt is a poor substitute for a fully funded short-term savings account.

How to Save More: Separation and Automation

I know you want to save more. That’s why I’m going to tell you exactly how to make it happen. These are the two specific steps you need to take to actually save more of your money:

  1. Separate your savings account from your spending account
  2. Automate direct deposits into the savings account

That’s it. That’s all that you need to do. For more on this concept, check out this free guide, PT’s Quick Guide to Truly Saving More.

I encourage you to read through that guide if you haven’t already. The concept there is truly the “golden ticket” of personal finance. It’s the best thing I have to offer you.

High Interest Savings

Lastly, I’ll just add a quick note about the best place to stash your short-term savings. It’s no secret that I’m a huge fan of the online savings accounts, like Capital One 360, FNBO Direct, and even SmartyPig.

These are all great savings products that will help you on your way to increased savings. I use them personally and could not recommend a better financial product.

To learn more about your options with online savings accounts, see my review of high-yield savings accounts.

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.


    Speak Your Mind


  1. I am currently in debt bacause of not saving for emergency, etc, you article is truly gonna help me, though i have not started because I am currently paying off my personal loan and credit cards, which i have set a target to finish paying end of October 2010, after that I will definately start saving, thanks for your articles PT, Mashopane from Pretoria, South Africa

  2. margapierre says

    This article is great! Definitely has good points which all people can relate to. Thanks! 🙂

  3. thom young says

    to be on topic, i like the pay yourself first method you talk about, and ING offers a good savings and electric orange checking as you previously talked about, savings first always, you need to do a feature on economic theory, that would be cool, i save 50 percent of my income a month, i am cheap/frugal

  4. @thom/ben – it’s not about different views. it’s about debating in the correct forum. heck, i’m not sure i disagree with you. i see value in having some gold.

    do me a favor and comment only about what the article above is talking about: “building up short term savings.” it’s about going from zero to something in a savings account. this post is directed at people who are starting with nothing in savings, not people wanting to debate economics and preserve capital. i don’t talk about that on my blog…yet

    if you want to express your opinion on gold and inflation i’ll give you an open mic. write up a guest post and i’ll share it here. then we can have that debate you’re itching to have. just don’t jump into every unrelated post with your 10 min lecture on gold/inflation.

  5. thom young says

    phil this is ben, geez you can’t take another view besides the norm? ha ha ok i’ll quit expressing my views, i’ll take my gold and bury it, jeb is really into his blog too, he loves when i disagree with him, so much that he deletes my comments, not trying to spam your site, just like reading about economics, i am into the Austrian school obviously, i am passionate about it, i like to study economic theory as a hobby, enjoy the blogging

  6. @thom – you’re right, i’ve got everything in gold. my house is made of gold, my clothes. heck, i carry at least 20 lbs of gold around in my wallet.

    please stop spamming my site with this unrelated crap.

  7. thom young says

    it’s good to save in case you need it for unexpected expenses, but just having your money in a savings account is also like losing money, most people do not understand this concept, because they never consider how inflation just eats away at their savings, your purchasing power is becoming less and less each passing day, sure you might have more dollars but your purchasing power has decreased thanks to inflation, the only thing that can preserve your purchasing power is to have real money, and that is gold and silver, gold has never been worth zero. now of course you need cash to buy things, but I’m talking about preserving your wealth, get in gold and silver related assets, it’s easier than ever to get into gold through equities that track the price of gold and gold mining companies, they are all going to increase in value as the price of gold continues to increase, may I suggest gld, gdx, gdxj to to name a few, of course consult your accountant for tax issues with these investments, you can thank me later or hold your losing value dollars in a savings account that gives you a bad rate

  8. It’s all about paying ourselves first. If we paid ourselves regularly the way we do the credit card companies, the mortgage companies, and the many restaurants we dined at, maybe we would be in a better financial position?

  9. Having a separate bank account for savings is extremely effective. If you are a regular wage-earner, by making sure that a certain percentage of your monthly income goes to a savings account, even before you can start paying your bills, you can force yourself to save enough for some unforeseen, or even planned, events.

  10. We definitely need a system to help us save money. That’s why force-saving program is very effective in this matter. When we let the system do the job, the result is apparent and we won’t get emotional whenever we see the money sitting in the account luring us to spend it on something we dream of.

    I love your series in Financial Literacy Month. Keep up the good work PT!