There could be multiple variations as well as investment options, generally, only four types of savings are well known; they are emergency reserve fund, long-term investments, accumulation fund and college educations savings.

Emergency Reserve Fund: this fund is usually saved for emergency use, and replenished thereafter. On the other hand, long term investments are basically structured for family security, retirement as well as inheritance; accumulation fund is a fund saved for use in the case of sudden huge expenses or for major purchases.

Emergency Reserve Fund
This type of savings is not an aspect of accumulation fund or long-term investment portfolio and therefore should be dealt differently. Every family ought to own an emergency reserve fund kept outside for sudden expenses. No matter how little, it is essential for each family to budget an amount to be set aside for the funding of the emergency reserve fund; it could even be $10 a week; you will be amazed how it will keep on accumulating to make a big reserve with time. The target for emergency reserve should be the keeping of an amount equated to nothing less than 3 month’s income. And the amount taken per time should be replenished without delay. This type of fund should be kept safely and should be kept in a place that will enable easy conversion to cash without incurring any early withdrawal penalty. In order to store an emergency reserve account, the three available options are the banks, money market mutual funds and credit unions.  Out of these three, local banks are the most convenient; however, the interest offered by banks to your fund is usually small.

If you are looking for an ideal substitute for banks, Credit Unions is a great idea; they offer you value for your fund and also offer safety like the banks. They can also provide some of the savings options offered by banks, but at a slightly higher interest rates. Money market mutual fund offers a check writing privilege.

Accumulation Fund
This type of savings is in effect, a long term emergency fund. It can take care of large or sudden expenses. It enables you to plan for a longer time frame – between one and five years before you can seek to use the money. Since you have determined to leave the fund in the account for a longer time frame, liquidity does not offer the same degree of importance as higher returns. The investment options available for an accumulation fund are Certificates of deposit, short term bonds, ultra-short term bond funds and mortgage-backed bond funds.

Long-range Investments
There are three basic reasons for this type of savings; to assist the family obtain a greater degree of security, make inheritance available for the family as well as fund retirement. This program is not for a short-term purpose. They are real investments and are structured to linger and grow for years to come. If possible, this form of savings needs to be diversified into 5 tiers.

As you maintain the budget and also add discipline, savings is the ideal way to stay off from the burdens of debt.