Struggling to boost your savings? You’re not alone! When it comes to saving money, having a clear strategy in place can make all the difference…and it all starts with budgeting.
To make your saving goals clearer, the aim of the game is not to only have savings for emergencies, but to also have “sinking funds”. This is for expenses that are not paid monthly, but that you know are coming, such as a holiday or home renovations that you are planning. Perhaps you want to install solar panels on your roof, update your kids’ wardrobe as the seasons change, or they outgrow their clothes, or replace your car tyres next year. This is how you do it:
How to create a sinking fund
- Firstly, decide which anticipated expense you’d like to save up for, and whether you’d like to save towards more than one goal at a time.
- Research how much each goal is likely to cost and create a target amount.
- Refer to your budget to work out how much you can afford to pay towards each goal, each month. From this, you can calculate how long it will take you to save up for each target.
- Now, decide on an appropriate savings account. You may wish to open more than one account for separate sinking fund goals. A standard savings account will be just fine for short-term goals. Long-term goals, however, call for a better investment rate. Look into a money market account, for example.
- You want to be able to access your money within 24 hours, in case of an emergency – so it’s important not to choose a savings vehicle where your funds are not locked in for a long period of time. We like the Old Mutual Interest Plus Fund or the Old Mutual Income Fund. If you are looking for something that is faith-based and Shar’iah compliant, there’s the Old Mutual Al Baraka Income Fund.”
- Start saving!