Save more, spend less. Earn more, still spend less. Those are the two ways you’re going to get advice about how to build wealth (and to me saving includes investing — should probably make that clear upfront). When people lecture about how to save more (myself included) the number one strategy is to automate, automate, automate. For those who never heard this sermon from on high, it means you’re routing a percentage of each paycheck into savings before it even hits your checking account. Of course anyone who took Psychology 101 can tell you this technic of stashing your cash before you see it increase likelihood you actually save instead of falling into the “whoops, spent too much and can’t afford to save again this month” mentality .
It’s good advice. Perhaps the best advice when it comes to efficiently saving. But there’s one more trick that’s even easier than automation: nicknaming your savings accounts.
The nickname strategy
I’m not the kind of person who creates vision boards or believes in the power of “The Secret”. Wishing something true doesn’t work. Otherwise I could keep binge-eating Ben & Jerry’s and still have Gigi Hadid’s body. Action and diligence are what make a dream become a reality. And, I’ll acquiesce, a dash of visualization. Knowing why you’re saving instead of just participating in the action of saving keeps you motivated.
This is why I nicknamed each one of my savings accounts. The name on each account provides me with daily (yes, I check my cash on the reg) reminders why I’m stashing money away instead of routinely indulging in my desire to never have to cook.
Why I have multiple savings accounts
Instead of adhering to the K.I.S.S. (Keep it simple, stupid) mentality of personal finance – I do have three different savings accounts and two checking accounts spread across two banks. Part of the reason I keep money in multiple locations is to chase a high interest rate on my savings with accounts like Ally. If you’re only getting 0.01% APY on a savings account – then you’re doing it wrong. (I’ve earned $68.51 in interest on a single savings account from switching banks less than a year ago. #worthit)
The other reason I spread out accounts is to simplify how I can track my budgets. This might sound strange, and I recognize it decreases the interest I can earn by not putting it all in one pot, but I like being able to just glance at my travel fund and know how much I can spend on an impromptu trip.
Yes, this could all be meticulously tracked in an excel spreadsheet – but I opted for the multiple account method because it works for me. Remember, this is personal finance.
My (sort of uninspired) nicknames
I know you’re dying to know what clever monikers I attached to each of my savings account for that daily dose of motivation. I hate to disappoint, but they’re pretty run-of-the-mill names.
The O.G. of my savings accounts received the cliché name “Honey Pot”. This account serves as my emergency fund and Mosby’s stash of cash. I do actually keep an excel grid for this account because I like to track Mosby’s expenses separately.
You can blame this lackluster nickname on my bank. Apparently “Other People’s Weddings Fund” was too long a name. This fund is used to pay for all trips, which as a mid-twenty-something is primarily weddings right now. I do actually use this fund to pay for all wedding-related expense such as gifts, travel, and bridesmaid necessities like getting my hair done. It’s lovely to be able to always afford weddings without it busting my monthly budget. 25 percent of all my freelance income goes into this account because none of my regular take-home pay subsidizes my annual adventures – or other people’s weddings.
Down Payment (and paying Uncle Sam)
Usually the healthiest of my savings accounts – until tax time – this one is meant to focus on my medium-term goal of buying a house. Frankly, I have no clue when that will be, but I figure I’ll want to own some land sooner or later. I tuck away 50 percent of all freelance income into this account. This strategy helps make sure I’m prepared to cut my check to Uncle Sam and the remainder will eventually help me put 20 percent down on a house.
And to think, I didn’t have a proper savings account three years ago. (Spoiler: I kept it all in checking).
Image taken from StockSnap
37 responses to “A Simple Trick to Save More Money (It isn’t automating)”
Yes to the medium term goal fund! I recently liquidated a large sum of my savings (will have to fill you in next time we meet), and it’s crazy how nervous and exposed I now feel. Ditching this feeling is almost motivation enough to get aggressive about building back up.
Ah, I can’t wait to hear what this is big move is!
Having multiple savings accounts works well for me too. I use Capital One 360.
I dig that Cap One is expanding to allow Internet-only customers deposit cash at select ATMs. I imagine that will be a wave in the future for all Internet-only banking.
I have lots of online savings accounts… 8 to be exact between husband and me. Crazy to some, but it’s easier for me to have money for specific task (home repair, pet fund, vacation, car repair, emergency fund (yes still have one separate), plus goal savings funds (like home cosmetic fund), an escrow fund (for once a year things like Costco membership and credit card annual fees), baby fund, etc.)
To keep it simple, I have have multiple accounts at only two separate banks: 5 through Ally and 3 through Capital One 360.
This type of savings plan isn’t for all, but I like seeing the car repair fund separate so I can easily keep track of how much I actually have saved for the car when something goes wrong. Easier than a spreadsheet for me.
Then, I have automated savings drafts pull out a set amount bimonthly (I’m paid bimonthly so it works) and I watch the money grow. 🙂
I agree that it’s so nice to see things separately than having to track it all on a spreadsheet. Easy to trip up on your spreadsheet game. I might expand and do another Ally one too for yet another savings goal!
I agree with you on the nickname strategy. I used to have 4 accounts, one at one bank and three at another and I had given them names as well. Seeing the name when I transferred the funds helped me stay motivated to reach the goal. However one of the banks I used started charging a $1 a month for maintenance for each account if your balance is below $250K, so I was paying $3 a month. Once I started to keep all my money in one account (so I could stop paying the $3) I lost that motivation. sigh!
There are plenty of other banks out there (like Ally) where you can avoid those fees! Good for you to ditch the bank charging you the fee though.
What savings accounts to do you recommend?
I personally like Ally for the 1.00% APY. It’s been pretty consistent where other banks tend to yank their interest rates around to lure people in and then drop the the rates. You can get higher, but I also value Ally’s customer service.
Nice. I really like the nickname idea. I don’t have multiple accounts but our long term savings account is broken out on our spreadsheet into different buckets. Right now I have inspired names such as ‘New Car Fund’ or ‘Travel Fund’ but maybe it’s time to liven the names up a bit 🙂
Completely satisfactory names if they motivate you! Sometimes it is fun to get a little snarky though. Helps ease the pain when you buy your seventh wedding gift of the season.
I found this worked very well for us, too – so well we got up to 10-15 differently-nicknamed accounts!
Also, our travel savings account was named “Travel and Personal Gifts” for the exact reason that you wanted to name yours Other People’s Weddings – nearly all it went toward was travel to weddings and wedding gifts!
Maybe it’s time I have a travel fund AND an Other People’s Weddings fund in order to encourage myself to spend money on personal trips. It’s just that vacation time factor too… Ugh this phase of life! 😛
I have 10 savings accounts. It’s perfect because I never feel like I am taking away from my other goals or savings when money comes out.
I have Emergency Fund (F*ck You Fund – 6 months expenses), Car Repairs Fund, Dog vet fund, Travel fund, Laptop purchase fund, Capsule Wardrobe Fund, Moving expenses fund, Gifts fund, Dental fund, Medical fund. All have weird nicknames so it’s fund to contribute!
That’s awesome! You are really crushing the nickname account game. What’s a Capsule wardrobe?
Ashamed to admit I don’t use a savings account!
I have a savings account and used to use it diligently but don’t use it anymore (in the last three years or so). I keep everything in my checking account. I’m starting to think that method is not too wise. I am selling my house and hopefully getting back my down payment. When that happens, it’s definitely going in a savings account.
After I experienced some debit card fraud that skimmed $600 out of my checking account, I keep my checking very lean. It feels much safer to have funds in my savings account (which also isn’t linked to checking).
I have never done automation. I would now start researching on this if it really helps.
Automation 100% helps because it means you’re saving first instead of last.
This simple trick is indeed good. I’m looking forward to use this trick to save money. Making money is very hard and if you don’t know how to save money than everything earn will go in vein someday.
Hope it helps!
I’m a big fan of the multiple savings account system and naming your savings accounts. It’s easy to get savers fatigue or quit saving when you don’t know what you’re working towards; however, when you name your accounts, you have a good idea what you’re working on and it keeps you focused. My favorite client savings account name to date is the “Tattoo Fund” that one of my clients started for a tattoo he wanted to get (who knew tattoos were that expensive?)
I DID! (Thanks Real Housewives). Tattoos are crazy expensive and then also addicting so people spend down payments on a house to ink their bodies. Crazy pants! (To me at least, no judgement. Well, I guess a little judgement.)
As of right now we currently have three accounts. One for primarily savings (1000 dollar emergency fund while we pay off debt)
One checking account for all of our expenses, and one Christmas club account. I figure we will open up more when we are debt free but for now these suffice.
I really wanted the Christmas Club account though, so now we can automatically take money out of my check throughout the year and when Christmas comes around..BAM, not stuck trying to find money in the budget.
The best part about it is… I can budget at Christmas and take the excess fund and put it towards debt!
Is Christmas Club an actual thing or just the fun nickname you came up with? It sounds an awful lot like my “paying for other people’s weddings” fund. It’s so nice to have a reserve stack of cash for those occasions and not have to crunch the budget a month in advance.
No it is an actual thing offered through some banks and credit unions. The idea is, it takes a little bit of money throughout the year and in Nov I receive a check for the total amount. I’m not sure if I could withdraw earlier but I don’t see any need to.
It’s an easy way for me to save and not think about it.
I love the nickname strategy! My savings accounts all have specific purposes, too — even if that’s just an emergency fund. Still important to know what the money’s for!
Glad to hear so many other folks are participating in the nickname strategy too!
Great Post! Certainly it is great to save up for things since that allows you to avoid going into debt, and naming your savings accounts based on the purpose is great.
I need to differ with your comment that saving is the way to build wealth, however. Trying to save our way to wealth is like trying to dig an Olympic sized swimming pool with a shovel. You can do it, but it sure takes a long time and you may well die before you get to enjoy your efforts. Investing is the way to build wealth, and any money you don’t plan to use within the next five years or so (and aren’t keeping for emergencies) really needs to be invested or the inflation demons will be chomping away on it, even if you get a good savings account interest rate.
Well said. I guess I consider investing a form of saving, so when I say “saving is a way to wealth” I mean it in the “don’t go spending all your money to keep up with the Jonses” type way. ie: routing money into retirement accounts is investing and putting money in index funds in my mind is saving. Of course you can’t just stuff money under mattresses as a way to wealth — which is essentially what savings accounts are these days with those joke interest rates. Thanks for pointing it out that not everyone thinks the way I do.
Great insights!! Saving for a house is 100% the best savings account you can have. Once you buy your house, you’ll have a gift that keeps on giving. Deductible interest, principle reduction, appreciation, depreciation, etc. all act like a savings account in their own.
The Federal Housing Administration (FHA) subsidizes loans for us home buyers who might not have saved up the required 20% down payment for conventional financing. They have a program that allows you to buy a house on as little as 3.5% down.
Since I live in CA, this is great news! I can buy a $285,000 1 bed condo for only $10,000 down. Home ownership could be a lot closer than you think.
Thank you for sharing this strategy for savings. I recently started doing this and it is great. Automate is a great place to start and I subscribe to the David Bach method when it comes to retirement savings. I found it harder once I had debt paid off and was working toward my savings goals since I did not feel the same level of accomplishment seeing a few pennies each month. Changing up the bank and getting more interest with multiple accounts has really helped me make progress. My travel fund has a specific name as the “Hawaii fund” right now! Mahalo for sharing!
As a soon-to-be college graduate, savings is at the forefront of my mind and I really like the idea of having multiple savings account with nicknames for different savings goals. Thanks for the tips!
We like to have multiple savings accounts too. The nicknames really help us stay on track and not spend that money on things other than what it’s meant for too.
Nicknaming your savings accounts is a great way to keep track of what you are saving for! Saving for a purpose (rather than saving aimlessly) is much more motivating. Thanks for sharing!