One of my New Year’s resolutions is to automate my family’s savings goals. Things have been pretty scattered these last few months, and while I am managing to sock away a little money in our online savings account, I’m doing so rather unintentionally – just moving money to a general account not earmarked for anything in particular.
I’ve found that I stay motivated when I have a specific goal in front of me.
I suspect most people are like that, but oddly enough few of us put our goals to paper when it comes to savings.
A frequent answer to the question, “How much do you need to save for retirement” – as much as possible. I get that. After all, there are so many variables to consider when planning for retirement, and for some, it is a far-off goal.
Still, it pays to plan both your short and long-term savings goals. Start with the most immediate needs. In our case, that’s the six-month car insurance premium.
I recently opted for semi-annual billing rather than monthly installments. My insurance company charges a $5 “processing fee” for monthly withdrawals.
I figure switching to 6-month billing is an easy way to save $60 next year. That is, as long as I have the money to pay the bill.
Using an Online Savings Account to Track Individual Goals
I created a new account in my online savings account (this looks a lot like a sub-account, but it is in fact a separate online savings account) and scheduled biweekly withdrawals in the amount needed to cover my six-month auto insurance premium.
I’ll earn a little interest while that money is parked, and I will save $5 each month in fees.
That’s a win-win.
Carry out that same example in other areas in which you are saving for a short-term goal.
For instance, my wife and I want to replace our living room sofa. To avoid going into debt, or tapping emergency savings (a worn out couch, though most uncomfortable, does not qualify as an emergency), we’ve decided to practice delayed gratification by setting aside $35 a paycheck over the next few months into our “New Sofa” savings account.
That’s the nickname I assigned to this account.
When enough is saved, and we’ve found the best deal on a sofa, we’ll transfer the money to our primary checking account and write a check for the new furniture.
We’ve taken the same approach with annual vacations, Christmas shopping, car tag renewals, and other “once or twice a year” expenses that often creep up and take a bite out of your budget throughout the year.
Where Should I Save?
If you’re interested in setting up something like this yourself, I highly recommend taking a look at the Capital One 360 online savings account. There may even be a bonus in it for you (updated 3/23/2017 – the new-account bonus is currently $25).
I’ve been a happy customer here since 2008, and I think you’ll find their service top notch.
The account nickname feature, the ability to schedule automatic withdrawals, and a neat Savings Goal tracker make their service a pleasure to use.