Person planning her types of savings

Saving money is smart — but are you saving in the right way?

Most people only think about one kind of savings: a general emergency fund. But here’s the truth: there are two types of savings you really need for a stable financial future — and they each serve a very different purpose.

In this post, we’ll break down the two types of savings every smart spender should have:

  1. One for the unexpected

  2. One for the expected

Understanding both will help you avoid debt, plan ahead, and stop feeling like your budget is constantly under pressure.


✅ Type 1: The Emergency Fund (for the Unexpected)

Your emergency fund is your financial safety net. This money is meant to cover true emergencies, such as:

  • Medical bills

  • Sudden car repairs

  • Job loss

  • Urgent travel needs

This fund keeps you from turning to high-interest credit cards when life throws you a curveball. It’s not for concert tickets, vacations, or holiday gifts — even if they “feel” like emergencies. 😉

💡 At Moola Masters, we recommend starting with 2–4 weeks of income if you’re just getting started. Once your debt is under control, aim for 3–6 months of living expenses.

Get step-by-step guidance in our free Money Mastery Starter Kit.


✅ Type 2: Short-Term Savings for Planned Expenses (aka “Sinking Funds”)

Here’s the second — and often overlooked — type of savings: the one for expected but irregular expenses.
In the personal finance world, this is called a sinking fund, but think of it as:

  • Saving for vacation

  • Setting money aside for back-to-school shopping

  • Covering annual bills like car registration or insurance

  • Preparing for holiday gifts or seasonal childcare

This type of savings protects your emergency fund from getting used up for things you knew were coming.

Want to go deeper? Here’s a great breakdown of what a sinking fund is and how it works from NerdWallet — one of our favorite go-to resources for personal finance.


✅ Types of Savings: A Quick Comparison

Saving Type Purpose Timing Examples
Emergency Fund Unexpected emergencies Unknown ER visits, layoffs, urgent repairs
Short-Term Savings Planned irregular expenses Predictable Vacations, holidays, tuition

By having both types of savings, you’re no longer caught off guard when life gets expensive.


✅ How to Set Up Both Types of Savings

  1. Use Sub-Savings Accounts
    Many online banks let you nickname savings buckets like “Car Maintenance” or “School Clothes.”

  2. Plan with the Spending Plan Spreadsheet
    List your upcoming expenses by month and assign a monthly savings goal for each.

  3. Automate Transfers
    Even $25/month into each savings bucket adds up fast.

  4. Protect the Emergency Fund
    Don’t raid your safety net for a planned vacation — build a separate fund so you can enjoy it guilt-free.

Need a simple, structured system? Budgeting 101 shows you how to set up both types of savings with easy templates and guidance.


✅ Summer-Specific Examples of These Two Types of Savings

Emergency Fund:

  • Broken AC during a heat wave

  • Trip to the vet for your dog’s mystery rash

  • Unexpected car issue on your road trip

Short-Term Savings (Sinking Fund):

  • Summer camp payments

  • Vacation plans

  • Home project materials

  • School clothes or supplies

Both of these types of savings are important — and they work together to reduce stress and give you real financial peace of mind.


💬 Final Thoughts

It’s not just about how much you save — it’s about how you organize it.
When you use both types of savings intentionally, your money works with your life — not against it.

Want to get this all sorted with no stress?
Check out Budgeting 101 — and let’s set you up with savings that actually support your goals.