Beyond the Nest Egg: Investing for the Life You Actually Want
- Jaycob Keuning, CFP®
- Jun 2
- 3 min read
We often hear a lot about investing for retirement. It's considered the ultimate long-term goal, and for good reason! While securing your future is undeniably crucial, life is happening now. Just think about all those other amazing things you're dreaming of before you hang up your work boots? You know, the adventures, the big purchases, the passion projects? These aspirations deserve financial attention, too. Investing can be the engine that powers both your short-term joys and your long-term security.
Investing for Short-Term Financial Goals (5-Year or Less Time-Horizon)
Short-term financial goals typically demand a focus on capital preservation and accessibility. Given the limited time frame, investments should prioritize stability over aggressive growth to mitigate the risk of principal loss due to market volatility. While traditional savings accounts offer security, their returns may not adequately address the erosion of purchasing power due to inflation. Let’s look at a few scenarios.
Scenario 1: Traditional Savings Account
Let’s say you save $167 per month over 18 months, aiming for a $3,000 goal. In a traditional savings account earning just 0.5% annual interest, you'd contribute a total of $3,006 and earn roughly $12 in interest, bringing your balance to around $3,018. A safe option, but not very growth-oriented.
Scenario 2: Investing in a High-Yield Savings or Money Market Account
Now imagine putting that same $167 per month into a high-yield savings or money market account earning a more competitive 4.5% annual interest rate (rates vary), the power of compounding begins to work—even over just 18 months. You’d still contribute a total of $3,006, but with interest, your balance could grow to around $3,115 (approximate calculation; yields may fluctuate).
In this scenario, even a modest increase in the interest rate through a high-yield savings account or a short-term CD can make a noticeable difference in how quickly you reach your $3,000 goal, showcasing the benefit of investing (even conservatively) for short-term financial objectives.
Investing for Mid-Term Financial Goals (5-to-10-Year Time-Horizon)
Mid-term financial goals allow for a slightly more nuanced investment strategy. The longer time horizon provides an opportunity to incorporate investments with the potential for higher returns, aiming to outpace inflation and benefit from the effects of compounding. A balanced approach that considers both growth and risk mitigation is typically appropriate.
Scenario 1: Traditional Savings Account
To save $20,000 in 7 years using a standard savings account earning 0.5% interest, you’d need to set aside about $238 per month. After 7 years, you'd contribute roughly $20,000, and with minimal interest (likely under $350), your final total would land around $20,350—just slightly ahead of your goal.
Scenario 2: Investing in a Balanced Portfolio
Now imagine putting that same $238/month into a balanced portfolio, which typically includes a mix of stocks and bonds. Historically, these funds have offered average annual returns between 5% and 7%. For this example, let’s assume a conservative 6% annual return.
Using a simplified compound interest calculator, contributing $238 monthly for 7 years at that rate could grow your investment to approximately $24,800—about $4,800 in earnings beyond your original contributions. That’s the power of compounding over time.
While market returns can fluctuate year to year, this kind of moderate investment strategy can meaningfully accelerate your progress toward mid-term goals, like a home down payment or education fund, while providing flexibility and a helpful financial buffer. Compared to a traditional savings account, even a slightly more growth-oriented approach could make your $20,000 goal more attainable—and help you get there sooner.
Why a Financial Advisor is Crucial:
The main risk with any investment is losing money when you need it. Market dips, lack of easy access to funds (liquidity risk), and potential economic slowdowns are key concerns. Depending on your time horizon, you may have little time for investments to recover from losses. On the flip side, the risk of not growing your money enough to outpace inflation poses an equally daunting risk.
Ready to turn your dreams into a plan? Whether you're saving for something around the corner or a goal years down the road, we’re here to help you align your investments with the life you want—now and in the future. Schedule a free 15-minute call with a Certified Financial Planner® to explore your goals, your timeline, and the best path forward.
Comments