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:
- an emergency fund
- a vacation account
- a tax account
- once-in-a-while fund
- a car fund
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.”
