Do your investments match your financial goals?

March 18, 2022

Aligning your saving and investment strategy with your financial goals can help you measure your progress as you work toward your goals.

 

You have an idea of what you want out of your financial life: A new home, college for your kids, regular travel and a sound retirement. Does your investment strategy align with those goals?

Focusing on what you want to achieve can help you determine how to invest. Here are examples of goals-based investing in action, using some of the same strategies financial professionals use.

 

Goal: Travel fund


Approach your next vacation with the same financial savviness you bring to any other goal by planning ahead.

 

$5,7501

The average cost of a week-long vacation for a family of four.

12 months

Save for your vacation throughout the year—not just the month prior.

Savings account

A travel fund is a short-term goal, but you should still keep your savings separate from your checking account. Consider using a basic savings account. If you travel frequently, a credit card with travel-based rewards can help you maximize your budget.

 

Goal: New home


For most people, a home is a big purchase. Knowing how much, and how long, you’ll need to save can help alleviate potential stress.

 

6%2

The median down payment on a home for first-time buyers.

$407,7003

The median cost of a new home in 2021.

Certificates of deposit (CDs)

Certificates of deposit are a low-risk choice to help you save for a medium-term financial goal. In exchange for agreeing to leave your money in the account for a set amount of time, you’ll earn a higher interest rate than you would with a traditional savings account or a checking account

 

Goal: College fund


College costs are rising. If you have kids, saving for college is an investment goal that requires some planning.

 

$10,7404 / $38,0704

Average annual cost of tuition at a four-year public, in-state university and a four-year private, nonprofit college, respectively.

15-20 years

Ideally, families kick off college saving when a child is born. This means a college fund is a fairly long-term investment.

529 plan

With a 529 education savings plan you make contributions with after-tax income, and contributions are not taxed when withdrawn for any reason. Any growth in the account is tax deferred, and any gains earned are not taxed when withdrawn and used for qualified education expenses.  

 

Goal: Retirement


Investing sensibly — and starting early — is key to retiring comfortably.

 

$47,5795

Average annual budget of households over age 65.

40 years

Retirement is the ultimate long-term savings and investment goal. Experts recommend starting as early as possible and continue to prioritize saving for retirement as you age.

401(k) and Roth IRA

Start with a workplace-sponsored retirement plan, like a 401(k), if you have access. Take full advantage of any employer match that may be offered as well as the tax advantage of contributing pre-tax dollars. If you’re already maxing out contributions to your workplace plan or don’t have access to one, consider opening a traditional or Roth IRA, which may provide you with additional investment choices.

 

Wondering how you can save, invest, pay off debt and have fun at the same time? Get tips on how to balance money.

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