Your first short term savings goal is to establish an emergency savings account with three to six months living expenses in it. Looking at your monthly budget should reveal how much you need to cover critical expenses in case of job loss, injury or illness. Take the time to review your insurance coverage as well, and increase it if necessary when considering emergency expenses. Even if you can only make a small contribution to your short term emergency savings each month, that amount will grow over time allowing your to eventually meet your goals. Your emergency savings can also be there in case of unplanned expenses like car or home repairs. An emergency savings account will provide you with the cushion you need, and allow you to handle worrisome expenses without relying on credit and thus, incurring debt and associated interest fees.

A money market account or mutual fund is often the best way to store your emergency savings. It is accessible without penalties, but not as conveniently accessible as your checking or attached savings account. Interest is often higher on mutual funds and money market accounts as well; however, do check with your bank regarding any minimum balances. Some people also opt for short term CDs for their emergency savings. Look for a reasonable level of access to your emergency savings. You likely do not want the account accessible via ATM, but at least a portion of it should be available without penalties at any point.

You may have other short term savings goals as well. Vacation savings is one of these, and if you know that in two years you will need two thousand dollars for a vacation, add that into your regular savings budget. Short term goals might also include funds for a new car, or a down payment on a new car. Many people will also use their short term savings as a place to save for a down payment on a home. When you have savings goals in place, work out budgeting for those goals. You may find it helpful to set up automatic transfers with each paycheck to accomplish these goals.

There are many aspects to good financial health, and creating a savings cushion is a very important one. An emergency savings fund will allow you to cover your expenses in case you cannot work, and will keep you from creating credit problems in such a situation.