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The difference between short, medium and long-term financial needs

Balancing your savings with your financial needs is no easy thing to do. There are so many products on the market it is difficult to know which product is the best to suit your needs. At Moneyfarm we know our products are best suited to medium and long-term investors.

Short, medium and long-term financial needs: Summary Table

😎 How to pick financial products?The products that best suit your financial goals
😎 What are short-term financial needs?Investments for a short period, typically less than 12 months
☝️ What are medium-term financial needs?Investment exceeding 12 months but less than 5 years
🏅 What are long-term financial needs?Investments exceeding 5 years

But what is the difference between the short, medium and long-term? It is important that you divide your wealth into different pots so you have a balanced approach and are equipped for the scenarios you are likely to face.

Do you know how much you will need to save for life events?

Short-term financial needs

This could be anything that you might need to do within the next year. You will need to have money put aside for both the expected and unexpected things in life. This could be saving for your next holiday, redecorating your home or it could be repairs to your car, replacing the fridge or getting a new travelcard.

In the short term it is important that you can access your money instantly and it would be sensible to have it somewhere where you know the value won’t decrease. This is a cash reserve for all those costly expenses. You would likely be looking for a current account with a good rate of interest.

Medium-term financial needs

You know you will need the money but it is a little way off, definitely not in the next year. It could be a house deposit, building an extension, a child’s university fees or a major event such as a wedding. These are events where you generally know the date you will need the money but always be prepared for the unexpected so check the penalties for early withdrawal. You might be more comfortable locking this up for a period of time but you can’t really afford to take too much risk with this money. A low-risk investment portfolio could be the right channel for these savings.

See how a flexible investment account could work for you

Long-term financial needs

These are events over ten years away and are often more complicated than what you might need in the short and medium term. You have time to plan and time to build up wealth so it is worth having an investment account that is slightly more volatile as history suggests this will give you the potential for higher returns. You might be saving for your retirement, future care or thinking about inheritance.


How to categorise your financial needs?
Short-term financial needs: Savings for six months to one year (vacation).
Mid-term financial needs: Savings for one year to 5 years (home renovation).
Long-term financial needs: Saving for more than 5 years (retirement).

Why are short-term financial goals important?
Short-term financial goals can give you the confidence boost you need to achieve longer-term financial goals. It will also give you the foundational knowledge you need to achieve larger goals that will take more time. In addition, it can help with budgeting, reducing your debt, and starting an emergency fund.

Why are financial goals important?
A meaningful goal can help you achieve a debt-free lifestyle and lead you down the path to financial freedom. Setting financial goals helps you to achieve financial success. In addition, you’ll gain more self-confidence in your money-making and management decisions.

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