How to Build a Milestone Fund?

Like any other savings habit you want to develop, it requires some planning to build a milestone fund. Here is my best practice advice for creating your own milestone fund:

1. Work Backward from Your Goal

How much will you need to cover milestone expenses? Start with the ones you can reasonably expect are coming, like graduations, birthdays, important anniversaries, holidays, weddings, etc. How much will it cost you to travel to the locations where the event will occur? For example, what’s the average cost of airfare from your home to your sister’s city, where your niece will be celebrating her high school graduation in a few years?

Tally those costs that you can reasonably expect. Then divide by 12 (or the number of estimated months until the event) and put that amount aside each month.

Now, think about the unexpected things that might occur, such as the death of a relative or family friend, or a baby shower for a dear friend who thought she couldn’t get pregnant. What will it cost in order for you to be there for those loved ones? Add up all those costs to get an idea of how much you’ll want to put into your milestone fund. Remember, the goal is to avoid debt so that you can enjoy what time you have with your loved ones.

2. Open a Separate Savings Account

Keep your milestone fund separate from your emergency fund and regular savings.

Your milestone fund is there to help you cover the costs of things you want to do for your emotional and spiritual well being. Your emergency fund and regular savings are there to preserve your financial well being. Keep the objectives and the accounts separate.

One trick to ensure you don’t make impulse withdrawals from your milestone fund is to put the account in a separate financial institution, one where it’s less convenient for you to access the money. Think of your local credit union as an option or a bank across town.

3. Build the Savings into Your Budget, Start Small and Automate

Always pay yourself first by funding your retirement, savings and emergency funds, but be sure to allow for some money in your budget to go into your milestone fund. You don’t have to dump thousands of dollars into your milestone fund right away. It’s fine to start out small, saving as little as $100 a month.

Make it easy on yourself by automating the savings. If your employer offers the service, have a portion of your take home pay deposited into your milestone account each month. Or, you can set up a recurring automated transfer between your regular checking account and your milestone fund.

If you rely on yourself to remember to make that transfer every month, there’s a good chance it won’t happen.

4. Speak With a Professional

It’s important to understand how your milestone fund fits into your long-term plans. You may have several targeted savings accounts, all of which must be looked at in conjunction with your financial plan. Contact a financial advisor if you have questions.

Return on Your Investment
A milestone fund can help ensure you are there for your loved ones and for yourself, celebrating the good times and comforting through the sad moments, all without resorting to sudden consumer debt. It can also help you pay off travel paid for on a credit card, so you’ll accrue miles, not interest.

I’m grateful I’ll be able to celebrate my uncle’s life and mourn his passing with my extended family. It will be positive closure for many relationships and will be sure to create new paths forward in others. The emotional value and opportunity to build on relationships from sharing milestone moments go far beyond the actual cost of getting there.

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