Many years ago I discovered something that transformed the saving habits of our family: online savings accounts.
Initially I was drawn to the accounts because their interest rates were better than any brick and mortar bank.
However, now I’m sold on them because they have transformed the way Mark and I manage our money and how we have taught our kids to manage their money. We use Ally.com for our accounts, but there are many options available these days.
Here are six reasons why I love using online savings accounts:
1) The accounts are easy to open. I can open an account online in a matter of minutes. When I have a new category I want to save for, I simply open a new account online.
2) The money is accessible, but not too accessible. It usually takes 2 days to transfer the money from one of our online accounts to our primary brick and mortar bank account that we use. This keeps the temptation at bay to tap into the money for everyday spending. It’s kind of “out of sight, out of mind.”
3) You can have as many accounts as you like. Currently Mark and I have 10 Savings Accounts: Emergency Savings, Vacation, Self-Employment Income Taxes, Future Car Fund, Property Taxes, Christmas, Special House Projects, Car Repair and Maintenance, Utility Replacement, and Medical. I prefer this to having one savings account that is used for saving towards multiple goals.
4) Multiple accounts help teens learn to manage their money. We taught our kids to manage their money by using a paycheck worksheet. Each time they received a paycheck they divided the money up based upon pre-determined amounts or percentages for what they need money for now or in the future. For instance, in addition to his primary brick and mortar account, our youngest had four online accounts: Million Dollar Account (This was the beginning of learning to invest–and he opened his first mutual fund before he graduated from high school–can you say compound interest?), College, Christmas, and Music Gear (because that’s important to him!). Every paycheck, after he tithed and paid for his phone and car insurance (we required he pay a percentage of those expenses), he deposits some percentage into each of those accounts. (For a sample paycheck worksheet, check out my Financial Notebook for Parents and Teens. It’s an accompanying resource for the Got Teens?: Time-Tested Answers for Moms of Teens and Tweens book.)
5) It’s easy to set up recurring transfers so you automatically save without having to think about it. Most of our savings accounts are growing because we have the deposits automated. Determined by our budget, most of the accounts have preset amounts that are moved automatically within a day of payday. Sometimes the preset amounts aren’t alot, but over time they add up.
For instance, when I had all five kids at home, August was a budget buster for us with school fees, back to school supplies, and school clothes. I usually needed about $1000 just to get everyone back to school. One September, I set up a new savings account that I called “Back to School.” Since we got paid every other week, I set up an auto transfer for $40 of every paycheck to go to the “Back to School” account. The next August, I had my $1000 (25 paychecks) cash to use for back to school and August never again was a budget buster for us.
6) It’s fun to watch your money grow. We’ve learned that money can grow even when you’re only throwing small, but regular deposits into the accounts. We’ve never made more than an average middle-income budget. With a family of seven, money was always tight. However, the more we used the “paycheck worksheet” strategy in our family’s budget, the better we were at being good stewards of the money God gave us.
What about you? What strategies do you use to save?
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