To read Part 4 of the Online Savings Accounts Series, go here.
I really love my online savings accounts.
They help me stay organized, plan for upcoming expenses, and remove the crazy fluctuations of just living life.
I sometimes hesitate showing my exact strategy for managing my own money. That’s because I firmly believe there is no one way that will work for everyone when it comes to managing our money.
My way may not be your way. And that’s OK.
There are an infinite number of ways you could set up your savings accounts – each one just as terrific as another, because it’s going to depend on the person more than anything.
- You may have more or fewer savings accounts than me.
- You may have very different types of names than me.
- You may manage them differently – meaning how and when you transfer funds into the accounts may vary.
- You may use fixed amounts (i.e. $200/month) or a percentage (i.e. 5% of income)
And any of these strategies would be right, so long as it works for you!
At Fiscal Fitness PHX (I can’t stress this enough), our goal is not that you manage your money exactly like me, or your own money coach. Our goal is to design a money management strategy that is totally perfect for you.
So, I’m going to share my exact savings strategy — but only if you promise me you will use it as inspiration and not to create doubt in however you’re currently doing it.
Disclaimer over. I feel better now.
Savings 1: Immediate access
I keep $2,500 in my savings account at my local bank. I do this “just in case” I need immediate access or something goes wrong in my checking account and I need to transfer funds. For the record, I’ve never needed it for either of these reasons, but the peace of mind it gives me is worth the interest I give up by keeping it at my local bank.
Savings 2: Upcoming expenses
At my online bank, I have a number of savings accounts that are for upcoming expenses. I transfer money into these accounts monthly so when the expense occurs, I’ve already set aside the funds and I’m ready for it. I currently have 8 accounts, also called my “buckets”. They are annual bills, clothing, pet stuff, grooming, kids’ stuff, medical, home repairs (needs) and home decor (wants).
Keep in mind, I have a business so some expenses I’m able to pay for out of my business account. So I also have “buckets” in the business for some things you might not be seeing.
To learn more about the types of expenses you may want to save for, check out this blog post.
Savings 3: Emergency savings
I keep the bulk of my emergency savings at my online bank where it can earn the most interest. Since it’s just sitting around waiting for a rainy day, it might as well be earning something! But, let me be clear that the purpose of this money isn’t necessarily to grow or earn lots of interest. The purpose of this money is to be there if and when I need it. My emergency savings is for a true emergency and because of this, I need to keep it where I can easily access it if needed. I would not keep my emergency savings in any type of investment account where it had the potential to lose money. Security is the name of the game with this account — not wealth building.
Not sure how much to save in your emergency fund, check out this blog post.
Savings 4: Goal savings
At my online bank, I also have one savings account that is earmarked as our “goal” account. The name of this account changes based on the goal we’re working towards. For example — we just bought a lake house in Michigan and for the last couple of years that was what we called our goal account. Once we’ve met that goal, we determine “what’s next” and change the name of this account to reflect the new focus! It’s fun, motivating, and empowering to see the name of that goal, every time I open my bank accounts.
Savings 5: Long term savings
I use my online savings accounts to help me manage everyday life (buckets) and to save for our future goals that are maybe 2-3 years out. But, of course, long term savings is an important part of our savings strategy too! I personally use a 401(k), IRAs, and brokerage accounts to save for my long-term future. I do some of this on my own and use a financial advisor to help with part of it as well. At Fiscal Fitness PHX, we do not manage investments or insurance products for clients, nor do we discuss these types of products as part of your long-term retirement planning. Those conversations should be directed towards your financial advisor.
Personalized for you financial strategies
There are so many ways you could set up your savings strategy and what works for me may not be what works for you.
Some of our clients have 23 savings buckets and some of our clients have 2.
I tend to be more in the middle.
If you want a Fiscal Fitness PHX money coach to devise your personalized savings strategy, invest in a Money Masterplan Session today. Your custom Money Masterplan will show you exactly what to save, how many accounts you will need, the exact names you should give them, and the precise amount and frequency you should fund each one.
And because no savings plan is complete without taking into consideration your spending, debt and income, Your Money Masterplan includes precise strategies for each of those areas of your money too! After all, they’re all connected.
To get your own custom Money Masterplan today, start here.