Everyone should be looking for ways they can save a little bit for the future. Putting money away today for tomorrow is definitely something the millennial generation should focus on as we build stable careers or start families. In my savings strategy, there are three tiers of savings: short term, medium term and long term.

Short-term saving is pretty much saving for a rainy day or an emergency fund. Having an emergency fund is critical because you never know when you’ll have an unexpected expense. A hospital bill, flat tire, or any other unexpected expense are all reasons to have an active savings account.  I like to have at least 3 months worth of bills in this account to be able to cover any expenses that may come up including unemployment.

Long-term saving is saving for retirement. I want to retire at 55-60 years old so aggressively saving monthly and contributing towards my 401k, Rollover IRA and Roth IRA are crucial. I also have my own personal brokerage account that I’ve built up with the goal of making more aggressive investments with a long term goal of having a few extra pennies to travel, franchise a business or something along those lines in the future.

But what is “medium-term saving“? How do you save for the medium term? Well this is where share term certificates or certificates of deposits come in to play. I have bought into a 60 month fixed rate share term certificate at my credit union and the interest rate is currently 1.75%. Buying in to this share term certificate means I cannot touch the amount I invested for the next 60 months, but each month I’ll get interest payments into my checking account.

Basically this type of investment is forcing me to let the money sit there for at least 5 years.

 At the end of the 5 years/60 months, I’ll have the option to renew the share term certificate at whatever the interest rate is at that point in time or to receive my initial deposit back in full. The important thing to highlight here is that money I put in this investment vehicle is money I don’t anticipate to need over the next 5 years. Should I need to take money out of it, I can, but I ‘ll have to pay a nice, hefty penalty fee.

One thing that I have to make sure I highlight here is the fact that generally credit unions offer better interest rates on deposit and savings accounts than big banks. If you have access to a federal or state credit union definitely take advantage of opening at least a savings account there to get better interest on your savings. And if you’ve got a couple hundred to buy into a share term certificate/CD, definitely do it. Your 2-5 year older self will thank you for thinking of their financial security.

Until next post folks…