We have 8 Savings Accounts… and how that turned our finances around. For years and years and years and years, my husband and I struggled to save money.
I don’t mean “save money” as in, use coupons to cut our bills, I mean we struggled to build a savings account, an emergency fund… a safety net for unexpected expenses. We were on an endless roller coaster of saving a few hundred dollars, then over-spending and having to take it back out of our savings account, then starting over to try and save again.
Or saving a few hundred dollars, then realizing our insurance bill was due (that only comes every 6 months), and having to wipe out our savings to pay that bill and start over. Rinse, wash, repeat.
Sometimes we’d even manage to save a couple of thousand dollars – but we really didn’t have a purpose for that money other than calling it our “savings” and therefore, it was easy to take it out and spend it.
It was so incredibly discouraging. But as our family grew and I became more and more aware of how dangerous it was to live with no savings on hand, we decided we had to buckle down and figure out a way to save for those expenses that didn’t show up every month and build an emergency fund.
How did we do it?
I opened 8 savings accounts. Yes, EIGHT. And I gave every single one of them a purpose and a name. Having all those accounts was really a game changer for us. Maybe it was just a mental thing, but we made up our mind that we would not spend money from any of those accounts except for what they were dedicated to.
Here’s what they’re named (our bank lets us name our accounts in our online banking setup):
- Emergency Savings
- House Addition Savings (we’re saving to build onto our house)
- House Insurance & Taxes (annual bills)
- Homeschooling Money (for curriculum I only buy once a year)
- Gifts (for Christmas and birthdays)
- Automobile Tags, Insurance & Maintenance (annual & semi-annual bills)
- Vacation Savings
- Medical Bills
And how did I start saving money for these accounts? Automatic transfers! My husband gets paid every other Friday, so the day his money goes, the bank automatically transfers money to each of our 8 savings accounts.
To get started, I determined how much money we need annually for each of these categories. Our Emergency Savings account goal was $10,000. When we started out, I budgeted $200 per month for that category. It was still going to take us a few years to get to our goal, but having made up our mind to only touch that money for real emergencies (and having money to cover the other things that come up from time to time), really made us think twice about taking money out.
For the annual and semi-annual bills, I looked up how much we needed each year, then divided that amount by 26 (how many paychecks he gets in a year) and THAT was the amount we needed to save from each paycheck.
For instance, our annual home owner’s insurance bill is around $1000. So I divided that by 26 and the number is $38.46. I round that to $40 and save $40 from each paycheck. The bank automatically transfers that $40 for me the same day it hits our account so we really don’t even “see” the money.
By doing that every single time we get a paycheck, then when that insurance bill comes due, we have the money in our “House Insurance Savings”. All I have to do is transfer the money from savings back to checking and we can pay the bill without it hurting our daily budget. Does that make sense? The same goes for our car insurance, car tags, etc.
And then there are the more flexible things… Christmas gifts, vacation, homeschooling curricula, etc. These aren’t necessarily fixed expenses, but we decided ahead of time how much we were willing to spend on those areas each year, then divide it up and automatically transfer the money. That way, when Christmas rolls around, we have a set amount of money to spend and that’s it.
We don’t have to worry about some gigantic credit card bill come January or wonder how we’re going to buy groceries because we bought too many toys. Or that big vacation we took last year? We paid cash for the whole thing (around $8000) and it was a trip of a lifetime… paid for without any debt out of vacation savings that we accumulated for 3 years! It felt so, so good!
If you’ve tried to save money before and failed, I’d encourage you to try something new! Open up an extra savings account… or eight 😉 and try automatic transfers! I don’t know that system will work for everyone, but it certainly worked wonders for us! Do you have a different method of saving money? I’d love to hear about it!
Sounds good but you must have a hubby with a great pay check coming in…so that being said..Rose you need to send me someone! LOL
Just curious doesn’t the bank charge a fee for so many savings accounts?
I bank with USAA and all of their accounts are actually fee-free. No minimum balance, no service charges, and no ATM fees (they even refund ATM fees from other banks if I withdraw cash somewhere else).
Ally is an online account that doesn’t charge anything fees and it actually pays interest each month on the money you put into the account. Savings is at 2%
We implemented your advice of having separate accounts and it has really made a difference. You’re an inspiration and encouraging.
Awww, thank so much Susan!! xx
We do something similar, but not to that detail. I think I need to do some tweaking to our system.
🙂 It’s amazing how much it helps to add details, huh?!
This all sounds great but there’s no mention of a mortgage payment savings account or a utilities savings account or food expenses. Where is that money put aside from?
Because those bills (mortgage, groceries, utilities) are actually due monthly, I don’t move them into special savings accounts, but rather pay them directly from our main checking account each month as they are due. I only move money to savings accounts for things that we pay less often – things I need to “save for” when they’re due. Does that help?
So glad I found this article. I’ve tried the ‘envelope’ system but this makes so much more sense since you don’t actually have to SEE the money and won’t be tempted as much by it!! I’m going to the bank this week my hubby to set us up some! Thank you for the inspiration!
You’re welcome Kim!
Cara @ Fashionably Frugal says
I just started my 4th savings account and you’re so right that it is much easier to save rather than pulling it out for ‘something’. I never thought of having medical savings, I love that, I had that lumped in with my Emergency Fund, tomorrow is account #5 then 😉
Thank you for sharing your encouraging story!
Oh awesome Cara! Thank you for stopping by!
I’ve been struggling to have s savings account. I may try this method. Thanks
Can you go to any bank and have more than 1 savings account? Do banks charge extra for it? I would like for all my savings account to stay with one bank that way it is easier to keep track of. I like your idea and have thought about it many times before. Thanks, your help will be appreciated.
I’m not sure about all banks, but I’ve had multiple savings accounts and 2-3 different banks with no problems. You’ll just want to find a bank that offers accounts without fees so you’re not paying out a lot.
Julie Hanson says
Capital One allows up to 25 savings accounts.
Most banks don’t charge a monthly fee for straight savings accounts but just shop around
Jaclyn Richmond says
We seem to always be behind so actually saving for even a monthly budget is difficult to do. We end up pushing money around and buy the bear minimum of everything which is much more expensive and comes with many late fees most the time. Any suggestions to get from dragging money to saving. Our income is enough but just barley so getting behind is a problem.
Also my struggle as a single partent one income house hold… following awaiting a reply
Hey Tiffany I am a single parent with a one income household and I’m currently using this system as well. I’ve been doing it for years. All my bills have a separate account. I have 7 total.
Rent/ utility bill
Pay off debt
Monthly bills, groceries gas outings and my coupons
Bigger expenses like rent Car note I pay bi weekly everything else I transfer an amount each time m paid some as little as $25.
I think the key is to never pay big monthly bills out of one check.
Do you do a monthly budget? If you don’t, start there
I was shocked at all the little leaks I had.
We do have a monthly budget. I need to update it though – we’ve had a lot of life changes since I last updated it 🙂
I recommend keeping a detailed spending tracker for 1 month. Keep all receipts and at the end of the day write down every transaction both incoming and outgoing and highlight it a certain color based on priority level. For instance your income would have it’s own color, then rent is obviously important as is utilities so those would be one color while less important or variable amount bills like cable or groceries have their own color, then unneeded things like a cup of coffee from starbucks or a trip to mcdonalds would be another. Then at the end of the month check and see where you might be able to cut out or try to reduce certain things you may not have realized you’re spending so much on and make a budget. I find that since me and my husband get paid weekly, a weekly budget is the best for us. Also we stopped eating out and make a weekly meal plan so when I go to the store I know exactly what I need for the week and get only that, it cuts out quite a bit from our grocery bill. I like the budgeting system that accounts for every dollar, that way even my extra willy nilly spending has a set amount included in our budget. After bills, savings and fun time money we have $0 left over. If we don’t spend all the money allotted for something we stick it into savings and reevaluate if we should lower it in our budget next week or not. It’s helped us out quite a bit and were only a couole of months in.
Wanted to say I liked what You wrote and will use it. Thank You, Sincerely, Barb
Thanks Rose! I am going to give this a try and keep from using credit for gifts and Christmas.
I have several current accounts as well as savings accounts. I live in the UK, so not sure if this is possible elsewhere. But I have one current account which has all of the utilities and direct debits. For the most part I do not touch this account or debit card. There is enough in there to cover the bills each month and any extra gets shifted to savings. (I have two sources of income, so one goes in this one directly). My other account is for groceries and any other spending. I am about to open an account for the car. So I will transfer enough each month to cover petrol, insurance, reapirs, and savings for the next used car. I have savings accounts for each child, kids home ed and lessons, travel, pets, emergency fund. It is a lot to keep track of, but easier than the old budget book I used to use when I was single and things were simple!
I really like your idea for the semi annual bills. I just got the bill for my house insurance and fortunately I had enough in “savings “… but it would be a lot better to have it in a dedicated account…. going to go to the credit union and see about that. Thank you
I have done this for many years and it truly works. I have 18 bank accounts in 3 different banks and only pay about $12/month in fees for all of them combined including an overdraft on 1 account. So for me that small fee is worth it. It also lets me have free cheques. I am able to transfer funds online between banks for free.
This type of savings has worked extremely well for me and my family.
I already do this for my mortgage so if something happens I still have my mortgage paid. I’m single and don’t make a lot but this sounds like something doable on a smaller scale. Thanks for the idea
hi rose. I am glad that someone else on internet also doing the same financial hack as i am doing.
though i have not apllied any auto – transfer becuase we have a better on time transfer thing in India.
One more thing, having 8 saving accounts must also help you in generating monthly interest. so if anyone who has not tried this, try it yet.
Danny Lew says
Awesome info on saving accounts. I will definitely try this out.
I just started doing this as well! We had a chunk of money come our way so I wanted to set up some savings with it! I find juggling so many accounts to be confusing, so I just have 1 and keep track of all the categories in an excel spreadsheet instead.
I have used this method for many years. It works! Instead of creating multiple savings accounts, each expense has a separate page(s). For example, auto insurance, house insurance, emergency, travel, etc… The notebook total equals the savings account total. I don’t have to transfer money to multiple accounts.
I HAVE BEEN USING THIS SORT OF BUDGETING FOR YEARS. IT’S WORKS GREAT FOR SAVINGS AND PAYING THE OCCASION BILL. MY VACATION FUND HAS GROWN AND LOVE THE IDEA WE ARE HEADING TO HAWAII FOR 2 WEEKS ON OUR CASH SAVINGS. MY CAR HAS BEEN PAID FOR FOR A COUPLE OF YEARS, BUT MY ACCOUNT IS STILL RECEIVING THE MONEY BUDGETED FOR A CAR PAYMENT. WHEN ITS TIME FOR A NEW CAR, I SHOULD HAVE A HEFTY DOWN PAYMENT FOR IT. MY MONTHLY BILLS ARE KEPT ON AN EXCEL SPREADSHEET, IN DUE DATE ORDER. PAY DAYS ARE HIGHLIGHTED IN RED AND INSERTED IN DATE ORDER, THEN ALL MONEY DUE ARE TAKEN OUT ALONG WITH A LINE FOR FOOD AND GAS. THEN WE LIVE OFF THE BALANCE UNTIL THE NEXT TIME A PAY CHECK IS DEPOSITED. IT HAS WORKED WONDERFULLY AND I LOVE THAT WE NO LONGER FIGHT ABOUT MONEY.
We have about 40 different accounts, with most in Ally. They are for all non-monthly bills and planned expenses (vacation, new roof, etc.). They are funded with automatic transfers by paycheck. Doing this was a game changer for us. And, no, no big paychecks here.
Yes – this is us too!
Tamara DeSutter says
I enjoy reading all of your comments.This has worked well for me for many years.
I have used a Christmas club through my bank for many years. Get a check in early
November. Use Capital one 360 for travel. Both are by direct deposit. Easy breezy!!
Thinking about adding another “slush fund account with Capital Fund.?They even
Send me a birthday greeting!!
Ross Kane says
This is an interesting idea. However, the fees on 8 savings accounts might be a little high.
With USAA (our bank), all of our accounts have zero fees!