Savings can be categorized by purpose and/or length of time until they are needed. Short-term savings that will be needed within about a year should be kept in cash-equivalents like savings accounts, no-penalty CDs, and money market accounts. An emergency fund is a type of short-term savings. Mid-term savings are for goals or purchases that will be made within a few years, and may be kept in cash-equivalents or in conservative investments. Long-term savings will be used at least five or ten years out from the start date, and can be aggressively invested. Retirement savings are a specialized type of long-term savings.
Further reading: How to Set and Achieve Savings Goals
|Type of Savings||Time Horizon||Investment Type|
|mid-term||2-5 years||cash-equivalents and/or conservative investments|
|long-term||5-10 years and longer||aggressive investments|
|retirement||until your target date (likely decades)||aggressive investments (appropriate to time horizon)|
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