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By Joan Igamba

With the New Year comes goal setting. If you are like me, you are probably thinking of what goals to set in various aspects of your life. I, for one, would like to spend less, and save more this year. But how do I ensure that I am saving more and actually achieving this financial goal?

The truth is, when it comes to deciding what things are worth your money and which ones are not, there is no one, right answer. However, it is really important to be careful about what you spend your money on and take your savings goals seriously.

One strategy to consider to build your financial security is having different accounts dedicated to different money goals. Here are four essential accounts to get you started.

1. Emergency Fund Savings Account

This account should be your safety net in case of any emergencies. The minimum recommended amount usually is four months of expenses. However, it could be more or less depending on your financial situation. The money should be saved in an account that is easily accessible at any time in case of an emergency.

Emergency funds will help you avoid having to borrow money when you need cash quickly in the event of job loss or an unexpected medical emergency.

2. Retirement Savings Account

If you have a retirement plan through your employer, contributions to this account are usually secure. However, it does not hurt to have a separate account where you save towards how you will support yourself later in life.

This could prove helpful in a situation where, for example, you were earning Kshs150,000 while at your job then when you retire your government pension only pays out at Kshs50000 a month. Can you imagine the lifestyle changes you will have to make?

A retirement fund should be left alone, do not touch the money in there. Let it accumulate interest to build a healthy fund for when it comes time to retire.

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3. Long Term Savings Account

This account is for large purchases you expect to make from two to 10 years down the line. The account type you choose should be an investment account that yields high interests over a long period. For example, government bonds.

A good tip to follow in order to achieve the goal of this account: Do not think about the money in there as just money but as what that money can do for you. If it’s a house you’re saving to buy, think about how it will feel to be a homeowner and not just the X amount that is in there. That way you can stay on track and not withdraw from it when short term needs arise.

4. Short Term Savings Account

If you have a large, planned for expense then this is the account to use. It could be for things ranging from vacations to new work clothes or even a new phone. These are goals that require time and commitment to save for and that would be irresponsible to cover out of your main, living expenses account.

Your short savings should live in an account that is easily accessible or locked for the period that you have projected you will have achieved your saving goal.

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