Before you start putting every cent you have into your brokerage account, we have an important announcement to make: Any money you need within the next month, five months, or five years does not belong in the stock market.*

Yes, you read that correctly.  That sentence above is the key to avoiding heartache, headaches, and a lifetime of popping Panadol Extra-strong pills.

Before we proceed, a little side note to emphasise our point:

The last place for your short-term savings is any place where it is at risk of being worth less when you need it most. That rules out the share market, which is prone to roller-coaster-like ups and downs, as is evident on any chart that tracks its month-to-month performance. Now, we don’t want to scare you away from shares. Over most five- and 10-year periods, the squiggly line on the chart that resembles a terrifying roller coaster ride slow changes into a gently rising upward slope. The key is time — giving your money time to ride through the stock market’s bumps and tumbles and reap the rewards of long-term investing.

With that important bit of business out of the way, we’re ready to find proper accommodations for all of your savings needs and devise a strategy for funding your long-term financial goals.

The best places for your short- and mid-term savings

Remember the emergency funds that we talked about in Step 4?  You need to park those in a place you can access at any time.  These places include basic bank accounts, high-interest savings accounts, fixed deposits accounts, and even Government bonds.

These types of accounts are safe harbours: They won’t provide killer rates of return (and may not even keep up with inflation), but they do provide a virtual guarantee that the money you deposit will all be there when you need it.

Keep in mind that one type of account may not best serve all of your short-term savings needs. For example, cash earmarked for a deposit on a car you plan to make in a few years is ideal for a fixed-deposit account.  The money set aside for the year-end holiday is better off in an instant-access high-interest savings account.

Once you’ve deployed your funds for near-term needs, it’s time to find the right spot for the money you’ll need to cover your meal at the new restaurant in town … in the year 2048.

Long-term parking

Much of your long-term cash stash (specifically, money designated for your retirement years) will likely belong in the MPF or an account set up solely for that purpose.

Get Yourself a Brokerage Account

If you want to buy shares, you’re going to need a broker. And in this modern day and age, why not find one online?  You can buy and sell shares with the click of a button, from the comfort of your home or office.

The sooner you get your short- and long-term savings accounts set up, the sooner you can get to the fun stuff — investing.

Which brings us nicely onto our next step…