Creating and Sticking to a Budget: Managing your Savings

by Melody on February 22, 2012

As part of Dave Ramsey’s first “Baby Step”, we saved $1000 to keep as our Emergency Fund.  The point of this fund is to set it aside and forget it and NOT use it for “emergencies” like needing a new pair of shoes.  I did have a hard time setting this money aside, knowing that we had so many other bills to pay in the beginning.  However, if we had not done this and a true emergency did come up, we would have fallen right back into the credit card trap.

$1000 saved, so now what?  We wanted to keep the money in a place that was not accessible with just the swipe of a card, but we didn’t want it totally locked away either.  We chose to keep it in a savings account through ING Direct (now Capital One 360).  We have to request a transfer of money to retrieve our funds, but it only takes 2-3 days.  This keeps the money at least semi-fluid.

We chose to open several sub-accounts under our main savings account:

  • Emergency Fund – Our original $1000
  • Kids Fund – Any extra birthday money my kids get
  • Car Insurance – We pay our insurance every 6 months, so I divided the total by 6 and deposit the appropriate amount in this fund each month.
  • Preschool - We figure out our yearly cost (minus summer months) and divide by 12. The monthly amount goes into this account.

It is super easy to link our checking accounts with Capital One 360 and transfers take less than 30 seconds to complete.  I will be honest, the interest rate is not very high but after comparing rates at other banks or online savings accounts, there wasn’t enough difference to make it worth the switch.  We’re comfortable with this site and our main goal for these accounts is not necessarily to make money.  We just want a safe and easy place to hold our money, that may make us a few dollars in return.

For smaller purchases or items we are going to be purchasing in the next few months, I keep the money in our main checking account but “set it aside” in a Google Doc.  Just by writing an amount in a column titled “Furniture”, I know it’s there and won’t touch it until we officially decide to buy the kids a new bed or a new recliner (or whatever it is we have decided to save for).

We have been with Capital One 360 for so long, that I’m honestly not familiar with any other online savings options.  I’d love to hear how you manage your savings or any other programs you’ve used and been happy with.

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{ 3 comments… read them below or add one }

Emily DAvidson February 22, 2012 at 8:00 pm

I used ING with the PTA funds while I was treasurer a few years ago and liked it. About 5 years ago when interest rates were high (around 4%) I used HSBC, and now and for the past 2-3 years I have used Ally. I think most FDIC insured on-line banks are easy, reliable and have similar rates.

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Malia February 23, 2012 at 7:35 am

I have several of these online savings accounts & like to use them for different saving reasons. Right now I’m actively using 2 of them while the others hold a minimum amount. One I am using for a vacation fund & the other for emergency/other large expenses such as taxes, tires, furniture, etc. I typically move the money around depending on the best interest rate. Currently Sallie Mae Bank & Discoverbank have the better rates of the ones I use. It’s really easy to set up accounts with these online banks

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Lissa February 25, 2012 at 12:06 pm

I also use ING direct for the last 3 years and love them. I have multiple savings accounts, all set up with automatic bimonthly transfers from my “real” checking account with US Bank. I also have an ING direct checking account (they have real checkbooks for these now too which expands your options – it used to be just a debit card to get money out). My eventual plan is to get my paychecks direct deposited into my ING checking and then schedule all my bills for online bill pay at the end of the month so that all my income is sitting in there all month gaining interest before paying the bills. Any additional income (such as MIR checks!) I can deposit into my old US bank account, then transfer into the ING account. I expect to greatly increase the interest I receive in this way, as I will have 4 times as much money gathering interest in a given month than I have with just the money going into the savings accounts. Even so, I made $77 in interest in my savings in 2011!!

I have categories for: emergency fund, home fund (my house that I own and have tenants in/future 2nd house downpayment fund), travel fund, retirement (pulls into here and then is pulled into the IRA automatically), and car (repairs/future replacement car). I think I am going to set up another savings category: healthcare (for all those copays, prescriptions, deductibles, etc). I love having everything automatically divided out in this way, helps me to keep on track with various things, plan travel, and not short myself in any one area.

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