Why Every Account You Have Needs a Name

by Jason Unger

As I’m helping more people manage their finances, I’m finding one common theme: people don’t have names for their savings accounts.

Instead of having multiple short-term savings accounts, they tend to only have one “savings account” that holds all of their money.

If you’re in this situation, you need to break out your savings into multiple accounts and give them names.

For example, you may have:

The alternative, having one central savings account, presents a major problem: it’s not clear what that money is really for.

When your vacation money is mixed with your emergency fund, how will you know what you can spend for your next trip?

If your car fund holds your once-in-a-while money, will you have enough to pay your next insurance bill?

By separating your savings, you are linking your accounts with your goals. You shouldn’t be using the money you’ve set aside for one goal for another.

Having Multiple Accounts Lets You Reach Your Goals

When you’re saving for multiple goals, having separate accounts for each goal lets you reach them faster.

For example, you know that you need 3 to 6 months of expenses for your emergency fund. After you reach that goal and fill that account, you can start saving for a different goal with a brand new account.

All the time, you’re never touching one account to pay for the expenses of another.

The Easiest Way to Reach Your Savings Goals

ING Direct makes it easy to set up multiple savings accounts with specific names for your specific goals.

Not sure the easiest way to get set up with multiple ING Direct accounts? Automatic Finances details the process in Day 9, “Open Your Short-Term Savings Accounts.”

{ 5 comments… read them below or add one }

Wojciech @ Fiscal Fizzle April 20, 2009 at 8:47 am

Very good advice. I have also heard of many people using a simple spreadsheet that totals each of their goal amounts within a single savings account. A little more work, but if you don’t have ING at the moment – a viable alternative.

I had this problem last year where I was dumping all of my cash into one account, and thought I could manage tracking everything. Unfortunately, I didn’t use a good method and soon lost count of what was for what.

lulugal11 April 20, 2009 at 12:50 pm

I love this idea and the fact that ING makes it simple. I was guilty of having one savings account and then when I found out that ING lets you easily make multiple sub accounts (with FREE transfers) I was hooked.

I now have multiple accounts and like you said, the separation makes it work so that one account does not have to pay for the others.

thomas April 21, 2009 at 4:54 pm

Multiple ING accounts is a really great way to break out saving plans. Using spreadsheets to help “project” savings goals is also good. Sites like Smartypig allow you to save for a specific goal.

Jennifer @ Money Saver 101 April 22, 2009 at 10:22 am

I don’t think having multiple accounts is necessary. If having them in separate accounts helps you, by all means do it. But it’s also possible to just keep excellent records of what the money is meant for, like a spreadsheet tracking the funds. Say you have $3000 in a savings account, you can have a spreadsheet detailing how $1000 is for emergencies, $500 for car insurance, etc…

Ken April 24, 2009 at 1:04 pm

I already have an ING account…I’m going to check on this multiple accounts thing. Keeping it all in one place makes sense.

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: