It often bogs my mind that this one overlooked thing is not just a given when it comes to saving money. I often ask people, when they ask me for tips on saving more, how much is in their savings account. You would be shocked to know how many people say they keep their “savings” in their checking account. HUH? Where they do that at? Lol. So many people believe they can save in their checking without separating the two and my answer NO WAY.
Just by the very definition, your savings should go into your savings account. It provides a concrete separation of your funds and ends the likelihood of “co-mingling” of your bill money, fun money and savings. It also allows you to get a clear picture of your progress. Each month, as your savings grows (hopefully), you can tell if you are getting closer to your ultimate goal. If not, you’ll just watch your checkings account fluctuate up and down whenever you get paid or pay your bills, and that can get extremely discouraging.
Not only do I recommend people have a dedicated savings account, I also think you should have auto deposits into your savings on payday AND you should also have multiple savings accounts. I know, I have some radical opinions.
You need auto deposits into your savings to make sure you are actually saving money. It is so easy to say you will save your left over money after you pay your bills and never do the transfer. Really, you are pretending that you will save but actually using that excess money for spending on things that will be hard to account for.
I also recommend multiple savings accounts, also known as sinking funds, because it allows you to save for various goals and helps you reach your long and short term goals quicker. It provides the mental clarity to help you see that you reached your goals.
I personally have about seven savings accounts for various things like vacations, gifts, clothes, emergency, etc. I often change up how much I deposit into each as a I reach my various goals.
First things first, however. Open a savings account TODAY. You can find a free internet based account here – https://www.nerdwallet.com/banking/best-savings-accounts. Leave me a comment and let me know your thoughts!