Short Term Savings
Short-term savings is basically your emergency fund. What happens if you lose a job, your car breaks down and needs repairs, a emergency medical treatment is needed?
The common thought is that you should have immediate access to 3 months expenses and access within 60 days to another 3 months of expenses.
What are expenses? On the 1st of the month start counting exactly how much money you spend. At the end of the month add it up. Even your lose change!
How do I do it?- I usually achieve this by taking 50% of my short term savings and putting it into 3 month CDs. These days setting up a CD takes less than five minutes. Since I usually use the same banks for CDs it can take a one minute phone in most cases.
I stash the rest of my cash in my online savings account.
This money usually grows at less than half the rate of long-term savings, but it is there when I need it.
How should you do it?
1. Establish a baseline for the amount that you need.
2. Create a savings plan to help you meet this amount while preparing for any other major purchases such as a car or house.
3. I would recommend 50% in 3-month CDs and the remainder in online savings accounts. Do the research on these guys.