Dave Ramsey likes to say, when talking about budgeting, "Tell your money where to go." We try to make this happen in our family budget, but sometimes it's difficult when money is being saved up for various future expenditures (say, a twice-yearly bill or a vacation or a large purchase) instead of being spent by the end of the month.
To combat this slushfund approach, where your money being saved for various expenses is all mixing together, untitled, in your checking account, Bart and I have a whole host of savings accounts. We use ING Direct and it's incredibly easy (and free) to open as many savings accounts as you'd like. You can name them whatever you choose and there is no fee to transfer money between various accounts.
For instance, we currently have an account called "Student Loans." When we get extra money or deposit a check, we put that money directly into the Student Loan fund, where it sits for a week or two until our next paycheck and then we pay the total amount toward our student loans. There's no temptation to accidentally spend the $85 check we'd said was for the student loans, because it's not in our checking account.
Likewise, our fifth anniversary is coming up this summer, and we wanted to do something great. About a year ago, we opened an account called "5th Anniversary" and started putting money towards it. All our graduation gift money went into that account and when plane tickets went on sale earlier this year, the money was right there ready to be spend (and to help us determine how much we could afford). The money hadn't been washed away in electric bills or fast food or an impulse pair of shoes.
Putting a name on our money, having it in a dedicated, specific location, makes budgeting and saving considerably easier for us.
Any one else use multiple accounts this way?
11 comments:
Oh yes, I've always done this. It's the only way I can keep straight all of the things I'm saving for. I opened an account at ING precisely because they let you open multiple savings accounts. My mom makes fun of me and all of my bank accounts, but it works for me.
We use a few different savings accounts. I actually have one account for all our "smaller" savings goals. Being the nerd I am, I have a spreadsheet that each month (or more regularly) gets updated. I deposit the entire sum of money into the savings account. Then I go to the spreadsheet and add the amounts to each different savings columns. This is where I save for things like car insurance, Christmas, vacations, and such. I can easily balance my account because I have a Total column that adds the savings columns together. It takes literally less than 5 minutes a month to keep this up.
Because our big focus right now is paying off student loans, we have one account just for student loan payments, and then another savings account for everything else. I like the idea of using a spreadsheet to keep track, Gina!
I don't know how we would survive without doing this. We use Wells Fargo and they let us have multiple savings accounts as well. It makes looking at what's in the bank not make you want to go out and go shopping... because you exactly what it's all for.
I have have thought about doing this, but I've hesitated because we usually keep all our money in a money market where it can earn a moderate return (well, it used to at least). If you split your funds llike this, do you earn the same interest as you would if they were all in the same account? (PS - any "investing for beginners/dummies posts in the works?)
I love ING for this very reason. Our focus right now is paying off our mortgage. It is so tempting to just put every extra penny into our mortgage. But we have to be realistic and realize that we also need a 6-month emergency fund. And the knowledge that our car isn't going to last much longer as a primary car. (I really don't want to spend $300+ to get the A/C fixed.) So we need to save up for another car so we can keep this one as a secondary car for just running errands and such.
By having savings account set aside for those exact savings goals, it's much easier to treat them like bills and just have money automatically transferred each paycheck (or month) to those savings accounts. That way I can still save for the things we need, but I can also scrape every last extra penny we have each paycheck and put it towards our mortgage.
We love ING. We have about six different accounts for various things. It is so nice to have our "car" account, so when we have to have something fixed or our auto insurance comes due, we don't have to worry about fitting it into our monthly budget because it's already right there waiting for us!
I got a free check card account at US Bank when they were giving away $75 in groceries. Now, I just put a certain amount of money each pay day into that account and it's my grocery money. If I don't use it all in one month, it rolls over. Then, I don't have to worry about overspending on food. I can only buy what can be paid for with that check card. It's also fun to see how much "rolls over" to the next pay day!
We definitely do this. Currently we only have "Student Loans," "Rainy Day," and "Fun." But I love the idea of opening a 5 year anniversary one (for, you know, 2.5 years from now), and a few other fun things.
I am loving this idea! We just have one savings account and it's hard to keep track of all the things we're saving for. I'm loving all of these great ideas, keep them coming!
I do something similar. I have 9 savings accounts set up. They are named things like Extra Mortgage, Car, Vacation, etc and I move funds into these accounts each month. I used to track it on a spreadsheet, but since it was all in one account in the bank, I was always getting confused. Now I know exactly what I have to spend on designated things. It took a while at the bank because I set them up all at one time, but it's worked out great so far. Good tips. :)
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