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:
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One for the unexpected
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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:
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Medical bills
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Sudden car repairs
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Job loss
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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:
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Saving for vacation
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Setting money aside for back-to-school shopping
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Covering annual bills like car registration or insurance
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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 |
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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
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Use Sub-Savings Accounts
Many online banks let you nickname savings buckets like “Car Maintenance” or “School Clothes.” -
Plan with the Spending Plan Spreadsheet
List your upcoming expenses by month and assign a monthly savings goal for each. -
Automate Transfers
Even $25/month into each savings bucket adds up fast. -
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:
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Broken AC during a heat wave
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Trip to the vet for your dog’s mystery rash
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Unexpected car issue on your road trip
Short-Term Savings (Sinking Fund):
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Summer camp payments
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Vacation plans
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Home project materials
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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.