How to Invest Your Savings for Short- and Long-Term Goals

If you no longer have credit card debt and have residual disposable income after paying your high-priority bills, your next step should be to save and grow your assets.

But with so many options available in today’s high-tech financial world, it can be difficult to know exactly what type of savings account you should use and when is the right time to start investing.

It is also difficult to know what and when you need the money. You might consider buying a house, saving for a baby, or going back to college – or maybe a combination of all three and then some.

“In general, you should think about your goals and break them down into categories based on time frames,” says Bridget Todd, head of coach development at The Financial Gym. “From there, you can determine the best way to allocate your free cash.”

Below, CNBC Select spoke with Todd and founder of Financial Gym Shannon McLay about how to map out your savings starting now and working toward your retirement years.

Once you have an emergency fund with three to six months’ worth of expenses and your repayments under control, you’re in a good financial position to do more with your money.

Before deciding how much to save and which accounts to use, you should first decide exactly what you want out of life, says McLay. Every milestone, dream or ambition comes with a price that you can prepare for.

“Do you want a travel fund? Are you getting married? Do you want to buy a house in 5 or 10 years? Do you want a tattoo?” she asked. Each of your goals will have a different timeline and require you to think differently about how you save and invest money.

“Tattoos are a big expense,” adds McLay, something often overlooked by millennials, along with egg freezing and the cost of owning a pet.

Keep cash for goals you want to achieve within the next two years in a low-risk account, such as a high-yield savings account that pays at least 1%. You can open a Goldman Sachs Marcus High Profit Online Savings account or an Ally Online Savings account and link it to your checking account to have it when the time comes.

And for goals that take place more than two years from now, consider investing with a brokerage account. It comes with more risk, but since you won’t need the money right away, McLay argues it’s worth the chance.

There are many types of savings and investment funds. In general, lower-risk funds offer predictable but smaller growth. Higher risk funds offer the potential to grow quickly, but you can also lose money when the market goes up and down.

A high-yield savings account is the least risky, because your money isn’t invested in the stock market, but it still offers interest rates 16 times higher than the national average.

When you are ready to raise money more aggressively, find a broker or robot advisor that fits your lifestyle and personality. “Do you want to be more proactive in managing your investments, or do you prefer to put it on and forget it?” McLay asked.

A simple app like Acorns links to your checking account and automatically invests spare change. Robotic advisors like Betterment and Wealthfront let you choose a time period for your savings goals and how much risk you want to accept, and then you can set a monthly amount to invest. They are usually cheaper (with a fee of about 0.01% to 0.25% of your income) than professional financial advisors who charge as little as 1%. Other platforms like Ellevest charge a membership fee instead of a percentage of your earnings.

If you want to take on more responsibility yourself, you can set up a brokerage account through companies like E*Trade, Fidelity, Charles Schwab or Vanguard.

“They have a little more work to do,” says McLay.

When investing in a fund that has a mix of stocks and bonds, there is more risk than when you own a larger percentage of stocks. Stocks are generally more volatile, while the bond market is generally riskier.

But you shouldn’t let risk scare you, McLay argues: “If your goal is beyond two years, you can weather the market’s ups and downs.”

Knowing this, you can place your money in different pools based on the distance of each target and how much risk you are willing to take. Investing for medium-term goals (six to 10 years) should be less risky than investing for retirement (more than 10 years from now).

Todd provides the following outline as a guide:

Immediate term (less than two years)

Keep savings in a savings account that can be used for any upcoming life milestones over the next two years. This way, Todd explains, you’re not stuck waiting for the stock market to move in your favor. You can access your funds at any time without worrying about additional tax formalities or how the market returns. Using a high yield savings account with an interest rate of around 1% won’t give you the greatest possible return, but you should feel comfortable knowing your money is in a stable account, insured by the FDIC.

Short term (3-5 years)

If you know you’ll need the money in 3-5 years, consider investing in the stock market – but be more cautious. “You want to keep at least 40 percent of your portfolio in bonds,” explains Todd.

Medium term (six to 10 years)

“You still want to be cautious about investing in goals this time around,” says Todd. But you want to increase the risk a bit to improve the returns,” Todd said.

Todd typically recommends a fund that includes at least 75% stocks for targets in this time frame. Having a portfolio with 25% bonds reduces risk a bit while still helping you achieve higher returns.

Long term (more than 10 years)

“Long-term goals, like retirement, require active allocation, which means having a minimum of 90 percent of stocks,” Todd said, explaining that the stock market has historically doubled. every 7 to 10 years.

To get the most out of your long-term investments, you need to invest heavily in stocks, she explains.

“There is a lot of life to live before retirement,” says McLay. “A lot of big-ticket items could happen between now and half past 59.”

And it’s important to remember that investing can help you buy them.

You’ll be most successful in growing your assets when you have a variety of high-risk and low-risk accounts, and a mix of short- and long-term goals you’re working toward.

Information about Goldman Sachs’ Marcus High Profit Online Savings Account and Ally Online Savings Account has been independently obtained by CNBC and has not been reviewed or provided by the bank prior to publication. Goldman Sachs Bank USA is an FDIC Member.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.