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Keys to Creating a Long-Term Savings Plan

Planning for your future? Here are some tips to creating a long-term savings plan that you can start building now and the small changes you can make today.

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It’s never too late to start saving money and looking at different types of savings plans that can help you build your savings long-term.

This post will help you start planning your long-term savings strategy and understand the different types of investing options you could use, such as an IRA, savings accounts, and investments.

Evaluate your current financial situation

Before you start saving or changing your current savings plan, it’s important to understand how much you already have saved and the current savings strategies you’re using. Take stock of your existing debts, assets, and debt-to-income ratio before working on a new personal savings plan.

Your priority should always be paying off high-interest debts as quickly as possible before investing your additional funds in long-term savings plans.

Also, look at your existing expenses, such as  mortgage or rent, utilities, credit cards, medical bills, or other loans you might have. These will all account for how much wiggle room you have in your budget for savings.

Decide on your savings goals 

The biggest motivation for saving money is having a tangible goal you’re working towards. Maybe that’s early retirement, a new home, or even a college fund. Think about how much you want to save and the specific time frame in which you want to save this money.

Decide what the most important factor is right now—do you want to fund your goal faster, or do you want to split your income between the goal and having some fun in the immediate future? 

Keep your savings goals reasonable, even if you have an aggressive savings goal you’re working toward. Don’t stretch yourself too thin now that you have to live paycheck to paycheck for the next 20 years to have the money you want for retirement.

If long-term investing is your goal, explore our investment services at First National Bank and Trust.

Determine your savings timeline

When you want to retire or buy a home, or the year you anticipate your child going to college will determine how long you have to reach your specific savings goal. As a long-term savings plan example, if you want to retire at 60 and you’re currently 35, you know you have 25 years to reach your retirement goals. Work backward from this date to estimate how much you need to save each month.

Having an idea of your overall timeline is key to long-term investing. This will help you determine the savings and investments you want to consider. For instance, a five-year certificate of deposit account versus a 15-year Roth IRA or other investment will look very different in terms of access to your money and the amount of interest you could potentially gain.

Understand your different savings options 

Researching different savings options you have is essential for making the right decision for your situation. 

An equity index fund might require a minimum investment amount but may offer long-term growth. There are higher risks to consider with this type of account, so keep this in mind.

IRAs can provide tax benefits and compound interest over time as part of a long-term strategy. However, there are strict annual contribution limits, so remember this when you open one. Income limits also determine what type of IRA you can open. Remember, this isn’t an investment fund—instead, it holds the investments you choose to make.

One strategy is to have a savings account that’s harder for you to access so you’re not tempted to dip into that money. It’s also good to diversify your savings between short- and long-term and use different account options. If possible, max out your company match 401(k) and your IRA yearly amount. Invest through a brokerage account after you’ve funded other savings accounts.

Decide how much to allocate to each savings account

Know your monthly budget and how much you can reasonably afford to save. If you have a specific goal in mind, then know how much you’ll need to save to meet that goal.

Understand associated risks

Investing can be risky due to market downturns and other outside factors. Don’t react quickly to these, though, as long-term savings can usually balance out downturns you experience. Bonds are considered less risky than stocks, so if you’re not comfortable with a high level of risk, consider your other options.

Think about your risk level before making any investments. If you prefer a conservative and safer investment, consider the impact this could have on your end goal. Understand that the value of your investment will fluctuate over time, but don’t let this impact your stress levels. Also, know that any long-term growth won’t look like a perfect upward trend.

How To Create A Long Term Savings Plan      Evaluate your current financial situation Decide what your savings goals are Determine your savings timeline Understand different savings options Decide how much to allocate to each account Understand investment risk factors  Talk to a financial advisor Don't neglect your short-term savings Review and adjust your savings strategy as needed

Talk to a financial advisor

The best place to start with any savings and investment plan is with your local bank. Every branch will have access to advisors that can help you from start to finish. 

Find a reputable advisor who will think about your best interests. Consider working with a wealth manager to help you decide on the best strategy. Speak with a financial advisor at First National Bank and Trust today.

Don’t forget your short-term savings

Life is unpredictable, so don’t forget about saving for now as well! Set aside enough of your income for short-term savings, like an emergency fund. A short-term savings account like a certificate of deposit (CD) or a money market account can be helpful for savings allocated towards vacation, a new car, or a downpayment on a home.

Review and adjust your savings strategy

Never think of your savings as a “set it and forget it” strategy. Instead, regularly review your plan and make any adjustments necessary. Check that you’re still on track to meet your goals with your current allocations, and double-check that any holdings are working as expected. If a fund turns out to be riskier than you’re comfortable with, it may be worth moving this money to a different investment.

Consider your current situation. Adjust your investment and long-term savings around the life you have right now and the responsibilities you have to manage in your daily life.

Start saving with FNBT

Investing can be a great strategy to maximize your money growth. But you don’t have to do it alone. If you’re located in Beloit, Argyle, Clinton, Delavan, Darien, Elkhorn, Janesville, Monroe, Walworth and Williams Bay Wisconsin, and Winnebago, Roscoe and Rockton, IL, First National Bank and Trust is always here to help you dive into investments and savings options.

Learn more about our portfolio management services and get started on your long-term savings strategy today.

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Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered. Investments are:
• Not FDIC/NCUSIF insured
• May lose value
• Not financial institution guaranteed
• Not a deposit
• Not insured by any federal government agency

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This site is published for residents of the United States only. Registered Representatives of Cetera Investment Services LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Investment Services LLC site at Located at: 345 East Grand Ave, Beloit, WI 53512 608-496-8363