In May of 2015 written an article for BudgetsAreSexy.com about why it was important to have separate places to keep your money. I gave the example of multiple savings accounts, and how they could help you.
Over 130 people have commented on that article so far. Some who had never heard of such a thing, as well as plenty of others who had their own ways to setting this up. It intrigued me to hear about all of the different tools folks used to set this up, enough that I want to test them all out and show you the results.
“Wait, more than one savings account?!”
In the original article, I talked about 6 reasons people might find this multiple savings account strategy useful. I explained that most people have many goals when it comes to money, so why not have a savings account for each goal?
Having multiple allows you to keep track of how much you money you have set aside for each goal and when you will have enough saved to complete it. You can’t forget, or think you have more saved than you really do. You won’t put yourself in a last minute bind when that annual insurance bill comes around.
TheBreakdown of My Current Accounts
So how can you do this too? Right now, I have 7 money goals I am currently saving towards. I’ll explain a little more for you:
1. General Savings/Emergency Fund
This is the account I have set up for when things go really wrong, which hopefully doesn’t happen anytime soon because this is really underfunded, but will be the first thing I do once my debts are paid off.
I was in/went to 4 weddings this year. Between the bridal and bachelorette parties, flights, hotel rooms, dog sitters, wedding presents, etc., I would have been in massive amount of credit card debt if I hadn’t started saving for this stuff. Luckily, once the first friend called telling me they were engaged, I jumped into action and set this account up. I started contributing a set amount each paycheck to make sure I had enough to pay for everything.
Weddings can put a HUGE dent in your budget if you’re not prepared.
Compare this to: a hobby budget.
Is there something in your life you are always doing? Unless you’re lucky, it’s probably not a free activity. Having money set aside for this will be extremely helpful and save you the hassle of trying to find the money in a crunch.
Ah, the Financial Bloggers Conference (aka FinCon). 🙂 This will be my first one (I cannot wait!), and I’m doing the responsible thing trying to save up front for it.
You can compare this to: A travel fund. Is there a trip you’ve been wanting to take/are saving for? Exploring new places and seeing different ways of living is actually healthy for the brain.
4. Roth IRA
I started this one to save for my Roth IRA contributions. I was using this to save up for the initial deposit to get my Roth IRA started. I’ve now made this initial deposit, but am struggling with whether to pay off the rest of my loans or ramp up my retirement savings. So this one is kind of sitting empty right now.
Compare this to: Hopefully none of your accounts. But it’s a good idea to have money going into your retirement accounts.
5. Yearly Bills
This account allows me to save money towards the homeowners insurance, housing taxes, etc. that come along once a year. Even though my girlfriend and I split the bills, it’s a sizable amount! I set this up so I could divide the estimated costs by the number of paycheck I get each year (26 of them) and have enough money for my contribution at the end of the year.
Compare this to: an account where you save for those larger annual/semi-annual bills (homeowners insurance, college tuition, etc.)
6. Car Insurance
Similar to the one above, I wanted to set aside money to pay my car insurance. I realized that paying car insurance every 6 months was way cheaper than letting them bill me every month. To make sure I have the money each go around, I set this one up to hold that money.
This one is separate because we don’t have a single car insurance bill – although that’s probably something we need to look into.
Compare this to: any other bill you know is coming a few months away that you should save some money for.
7. Bright Cents
This is a separate account that I fund every once in a while when I need to pay the bills to keep the blog running. Nothing good in life comes free, right? 🙂 This is kind of like my hobby budget as well.
Multi-Account Set up
- This is literally as easy as pressing a few buttons, and you’re done. You can add as many accounts as you’d like.
- A tip – Typically, the bank will ask you to make an initial deposit to get the account opened. If you are going to be transferring money from an existing savings account, make sure you don’t go over your monthly “withdrawal” limit for the account you’re using to fund the others. I think the limit is usually 6 withdrawals out of one savings account each month. If you do go over that limit you will likely find yourself paying a fee.
Reasons I Like Using Ally for This:
As with many banks, you can set up nicknames for each account you have. I like to title them using three things that really help me keep track of everything:
1. What I’m saving this money for
2. The amount I need to save to reach that goal/timeline
3. The date it’s due.
Here is one of my account nicknames:
If I change my mind, or make a mistake, I’m able to update the name of a savings account in a matter of 5 seconds. It’s not like you’re 100% locked into anything when you use this method. There is some level of consistency, but everything can be changed very quickly.
Automatic Recurring Transfers
I set up a bunch of recurring transfers from my checking account to a specific savings. Each paycheck, I transfer money to the weddings account, car insurance, and yearly bills. They let you choose exactly how far between each transfer you want to go – in my case two weeks. You can set it for every week, up until every year, so it’s pretty flexible.
I know in this economy it isn’t much, but 0.99% interest (as of this writing) is pretty good compared to my old Bank of America account that paid me 0.10%. I think it’s not the actual amount of money I get, but rather the point of it. My old bank was too stingy to pay me anything to be their customer, so here I am, making slightly (very slightly) more, and feeling a little more complacent. But certainly not complacent enough to not try other banks in the future. 🙂
Good Customer Service
Every time I’ve had to call Ally (which, honestly, was about twice since 2010), I’ve had a nice person on the other end of the line. That means a lot when you come from the other mega bank who makes you select from 3 different phone tree menus before connecting you to an actual person.
Things Ally Could Improve Upon:
Their Color Scheme
They redesigned their website a few months back and I’d be lying if I said I liked it. Yes, it sounds so minor but it actually makes me a little nauseous sometimes. 🙂
Customer Service with other bank products
I’ve heard a lot of complaints from people who have CDs with them and car loans, who are just unhappy. I’ve never had the same experience, however it could be the difference between the two areas of the company.
Who should do this?
I think for many people who are just getting started or who are still in debt, this method can be very useful.
When you’re in debt, there are a lot of conflicting thoughts going on in your head. “Should I save this dollar or use it to pay off debt? But I do have that bill coming up soon. I should probably save it.”
After all of that, let’s say you do decide to save it. 4 months from now, you might not even remember what you saved it for!
Likewise, when you’re just getting started with really paying attention to where your money is going, it’s helpful to keep some kind of order among the chaos.
Having these itemized accounts set up really helps because you know exactly how much to save, where it goes and when it’s due. Done.
You then have more time to focus on putting the extra money towards other things, like your student loans or mortgage payments.
There are plenty of other ways to separate your bank accounts. Alternatively, some people enjoy having one chunk of money, and that’s totally fine. You need to decide what’s right for you and see if this method is helpful.
Worse comes to worse, you hate the tactic and end up not using it. Hey, it was worth a shot!
I’ll be featuring more options for you to separate your nuggets of savings in the next few weeks – so keep an eye out!