Saving money can be such a complicated process. As a financial counselor (and person that has totally been there!), I see people everyday that try to put $200 in savings every month, but then pull from it throughout the month and eventually land in my office for an emergency loan. Saving money is more than just putting money away. Setting goals and assigning every dollar will make it so you have money to save.
Designating money into seperate accounts takes the guess work out of saving. If you assign each dollar to some aspect of your spending life, you will have more control overall.
Here is a list of savings accounts that everyone should have:
- Rainy Day Account
- Kid #1 (for education and big expenses like a first car!)
- Kid #2
- Car Down Payment
- Medical Bills
- House Down Payment
- Car Maintenance
- New School Clothes
- Vet Bills (if you do not carry pet insurance)
Forget the main savings account!
The advice that I give everyone is to forget the main savings account, and open up several little ones. I always recommend an account per kid, one for a big purchase like a car or a house (or both!) and a rainy day fund, which I tell people to actually nickname “Rainy Day Fund.” What happens with people that are stretched is they get surprised by an unexpected bill, like new hockey equipment for your son that didn’t tell you the team he has ALWAYS dreamed of getting on requires he have his OWN equipment! When people have a rainy day fund, they have money to cover the bill. By saving $25 a month, you will have saved up $300 in a year.
Car Maintenance Does Not Have to be a Budget Killer
Another scenario that I see constantly is someone needing a loan to fix their car. Car trouble turns into money trouble really fast, and it pains me to see people put expensive car maintenance charges on their credit cards. I recommend everyone put away $50 a month towards car maintenance. That will create $600 in a year. A car needs new tires about every five to six years depending on how much you drive and what the roads are like. A new set of tires can cost $400-1000 again depending on the make and model of the car. If you save $50 for five years, you will have $3,000- much more than you need for new tires. You can even get a new paint job or have money for a down payment on a new car.
Don’t get caught with your pants down – or with an empty wallet. Plan ahead and assign every dollar a purpose.
I would love to hear of any other ideas people have for mini savings accounts!