I know it might seem a little strange, but some time ago, I realized that if I had my savings in one big lump sum, I wouldn’t be able to save as effectively. I’d reach some sort of “emergency,” take the money out, and not remember to put it back in.
Once I started identifying my savings goals, keeping them in separate accounts helped me to be extremely successful in reaching them.
Here are a few reasons why I love having multiple savings accounts and you should too.
1. You’ll Be Organized
Saving effectively is all about organization. If you don’t know how much money you have, it can be easy to over allocate it. How many times have you sat down and thought, “I have $100, so I’m going to spend it on x,” only to use it for something else later? When we don’t write down our goals, it can be difficult to remember why we’re saving in the first place. Having multiple savings accounts allows you to visualize everything, and each goal has its own amount attached to it.
2. You Won’t Withdraw It
For months I worked hard to save $10,000 for the birth of my twins. I put every spare penny I made into that account. Along the way, I had car trouble. I had to move back to the United States from a different country. I wanted to go on different trips. My husband had to pay $600 to the dentist for two fillings, and all that time I never once touched the $10,000 I had in savings because it was meant for my twins. When you have multiple savings accounts and you have earmarked them for certain goals, you are much less likely to take out the money because when you structure your savings like this, you don’t want to take away from your goals. There is no way I would withdraw money from my baby fund and use it for a vacation. However, I could have easily done this if all my savings was in a big lump sum and not separated out.
3. It’s Important for Your Future
Every day I talk to people who are looking to get into better financial shape. They either have loans to pay off or are overspending or are worried about leaving their children and grandchildren with the burden of their debt. It’s a travesty that so many people live paycheck to paycheck. I have people very close to me who are in this type of rut, and I understand that it is extremely difficult to get out of it. However, in order for you to stop the cycle of poor spending habits and debt, you have to save. Having emergency funds and savings allocated for different goals prevents you from plunging further into debt and teaches you to have the money before you buy something. It seems simple but for many, it’s a huge challenge.
Separate savings accounts labelled with your goals is the way to overcome it.- Catherine Alford