To be clear, I consider anything under 2 years as short-term, but this is an arbitrary concept, and your understanding of short-term may differ from mine. In any case, keep in mind this specific case is planned for a 10-month timeline. With that being said, let's get to it!
I am an amateur musician and, more specifically, a guitar player. Even though I play just for fun, I have some "dream gear" that I plan to acquire over time. The issue is the kind of gear I have in mind is not exactly cheap and I'm not exactly rich, which means I need to plan my steps very carefully.
My next planned acquisition is a guitar. I want to buy a Gibson Les Paul, either a Standard, Classic or Traditional. I actually prefer custom handmade guitars and have two of those, but the Les Paul is such an iconic instrument and many of my guitar heroes are famous for playing one so it's been a dream of mine for a while now.
Where I live, I can get one for something between USD 2,800 and USD 3,200, depending on the specifications, year of production and a few other details. I don't have that kind of money to spare right now so I made a savings plan to buy the guitar later in the year.
As I said before, I can't afford the guitar right now so I created a 10-month saving plan from March until December 2023. That's something that fits my budget and by setting my goal to December, I already decided on my Christmas gift so it's a double win!
But while I was drafting this plan, I started thinking that this money would just sit around for almost a whole year before it would be needed so I started thinking about how to make the most of it.
I needed to find something that would give me the best yield possible at low risk because since I have a set goal for this money, I don't want to risk losing any of it as it would mean I would have to delay my goal even further.
The answer came quite quickly, actually: HBD savings! It's a relatively low-risk move and, at 2% APR, it's hard to beat!
Let me show you what the plan looks like.
| Month | Amount saved | Interest | Total |
|---|---|---|---|
| March | $342.86 | 0 | $342.86 |
| April | $342.86 | $5.71 | $691.43 |
| May | $342.86 | $11.52 | $1,045.81 |
| June | $342.86 | $17.43 | $1,406.10 |
| July | $342.86 | $23.43 | $1,772.39 |
| August | $342.86 | $29.54 | $2,144.79 |
| September | $342.86 | $35.75 | $2,523.39 |
| October | $342.86 | $42.06 | $2,908.30 |
| November | $342.86 | $48.47 | $3,299.63 |
| December | $342.86 | $54.99 | $3,697.48 |
Just in case it's not clear, the Amount saved column represents how much I will be adding to savings each month, the Interest column is the projected amount I will be getting due to savings interests and the Total column is just the sum of everything.
As you can see, this plan will net me around $ 270.00 in interest and while it may not sound like a lot, it means I could potentially buy my guitar a month earlier than planned or use the surplus to buy other things such as a new guitar pedal for example.
The main point is I will have $ 270.00 that I was not accounting for and I can't think of other ways to get it in this time frame at this level of risk. And, speaking of risk, let's explore that a bit more.
I mentioned I was after a low-risk move for this plan, and I do believe HBD Savings is just that but there are risks involved. Let's take a look on the main risks, in my opinion.
While this is probably the risk with the highest impact, in my opinion, it is also the less likely to happen. If Hive loses it's value, HBD will also be worthless but, if we reach this point, the whole network will collapse (remember Luna?). Hive has a few mechanisms to prevent that from happening and I also don't foresee something like that happening anytime soon but it's important to know that this is a risk and you could potentially lose all your investment.
Hive savings APR is "controlled" by the top 20 witnesses. Each witness sets the APR as they see fit and the median of that set of values is then applied to HBD savings.
Right now, the majority of the witnesses believe 20% is the way to go, but, in theory, that could change anytime.
This is not a huge risk in terms of impact because you don't actually lose your investment if this materializes, but it can potentially delay your plans in the case where Hive witnesses decide to lower the APR on HBD savings.
This is actually more of a fact than a risk but it's important to know. If you need to withdraw your HBD from savings, it will take 3 days before it becomes available to you so plan carefully because if you believe there is any chance you may need these funds immediately, then Savings is not the best choice for you.
HBD Savings is a great long-term plan but it can also be leveraged for shorter-term objectives. Its high APR and relatively low risk make it a great option to allocate any funds that you won't be needing for a few months. Be aware of the risks, because they do exist, and plan accordingly.
