You will be able to decide whether a goal's money should be invested at all.
At a family dinner, an uncle hears you are saving for a flat and asks why the money is "sitting in the bank doing nothing". He has done well from shares over thirty years, and he means it kindly. He may be right about some of your goals. For others, following his advice could cost you the goal itself.
The question for each goal is whether its money should be invested at all. Which fund or shares to pick is a separate question for another course. This lesson gives you a way to answer the first one.
Investing in shares or funds makes sense for a goal when two things are true. The date is many years away, and a fall in value would have time to recover before you need to sell.
A child's university fees fifteen years from now fit that description. So does a goal you would happily delay, such as an extra property or a long career break. Over a period that long, the higher expected return of investments can make a real difference to the monthly figure, as lesson 1.3, When saving returns change the monthly figure, showed with PMT. Keeping all of that money in cash for fifteen years would give up a lot of that growth to stay safe from falls that the long horizon could absorb.
Even then, invest only the share you could watch fall by a third without changing your plans. If a bad year would make you sell, the money was not really long-term money.
A goal with a fixed date and no flexibility should not depend on markets in its last few years. If the hotel deposit, the flat payment or the course fee is due on a set day, a fall shortly before that day can't be waited out.
This doesn't always mean a fixed-date goal can never be invested. A goal twelve years away with a fixed date can still be invested for its first several years, as long as you move it into cash-like places on a schedule well before the date, as lesson 2.1, Your time horizon decides how much risk a goal can take, described. What it does mean is that the last stretch must be in places that hold their value.
For Mei and Daniel, that settles most of their goals at once. The wedding and the flat payments are fixed and under five years away. Their money stays out of the market. The car is optional and five years away, so they could invest some of that money, but since the car may never happen and they don't want to watch its fund swing, they decide not to. That is a reasonable choice either way; what matters is that they decided on purpose.
Some people are offered an insurance savings plan, often called an endowment plan, for a goal such as a child's education. These plans take regular premiums over a set number of years and pay out at maturity.
The main thing to check before using one for a dated goal is the surrender value: what you would get back if you stopped early. In the first years it is often well below the premiums paid, because of the costs built into the plan. If there is any chance you will need the money before maturity, look at the surrender value table in the policy illustration for the year you might need it, and compare it with what you paid in. A plan whose maturity date doesn't line up with the goal's date is a poor fit, whatever its projected return.
This is not a judgement on whether such plans are good or bad. It is a check on whether the money will be there, in full, when this particular goal needs it.
For each long goal, you need three answers in writing. Would you invest any of it? If so, what share of it? And on what date would you start moving it into cash?
As an example with made-up figures, Farah is saving for her daughter's university fees in fifteen years. She decides to invest 70% of the goal's money and keep 30% in cash-like places, and to start moving the invested part into cash when the goal is five years away, a third each year. Her reason, written beside the goal, is that the date is fixed but far off, and she would not need to sell in a fall during the first ten years.
How to build and run a portfolio for money like this is taught in Build and run an ETF portfolio. Bonds, T-bills, SSBs and fixed deposits covers cash-like and bond options in depth. Neither is needed to make the decision in this lesson, which is only about whether and how much.
Go through the goals on your sheet that are more than five years away. For each, note the share you would invest, if any, and the year you would begin moving that money to cash.
For each long goal, write whether you would invest its money, what share, and when you would move it to cash.
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