Saving for Infrequent Expenses and Financial Goals

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Sinking Funds, Bucket Accounts and Savings
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Earlier this week, we talked about your best financial tips, tools for budgeting and the pros and cons of different investment options. Today, I want to take a look at some additional financial tools that may help you stick to your budget and save for financial goals.

Creating Sinking Funds or Bucket Accounts

Some people refer to these as sinking funds, but I tend to think of them as bucket accounts. Basically, a bucket account is a separate account that you use to separate out certain expenses. We have accounts for car repairs, savings and our Samaritan Ministries’ balance (in lieu of traditional health insurance). This year, we’ll be establishing additional accounts for clothing, homeschool curriculum, field trips & extracurricular activities, Christmas & other gifts, medical & dental expenses and saving for a new car.

The idea behind these accounts is to save a little bit each month towards these infrequent purchases rather than trying to come up with the entire amount out of a single month’s budget.

While traditional banks may frown on having so many accounts or require minimum balances in savings accounts, online banks are set up to make creating bucket accounts a painless process. I’ve been banking with ING Direct (now Capitol One 360) for years, and all of my bucket accounts are tied to each other, my 360 checking account and my local checking account so that I can easily transfer between them.

Using bucket accounts gets the money out of your checking account — where it’s likely to get spent — and makes it easy to see how much money you have toward each specific expense or goal.

(If you’re not currently a Capitol One 360 account holder, you can receive a $25 bonus when you open a new account with a $250 balance. Email me if you’d like an invitation, which is offered through their refer-a-friend program!)

Set and Meet Savings Goals

Earlier this week, when I mentioned this series to Tara from Deal Seeking Mom, she told me about SmartyPig, another online bank that allows you to set up mutliple accounts and multiple savings goals so that you can track your savings as you work toward a large purchase, vacation, college tuition or whatever your goal may be.

SmartyPig is an FDIC-insured bank offering a 2.01% APY, but they go beyond traditional banking services by offering tools to help you stay motivated to reach your goal as well as offering other people the opportunity to contribute toward your goal.

I plan to open savings accounts for each of my girls that their grandparents can contribute to as well as one for the second honeymoon my husband and I are hoping to take for our 10th anniversary in a couple of years. While I plan to keep my bucket accounts at Capitol One 360 for infrequent expenses, I may move our car savings to SmartyPig as well.

Your SmartyPig balance can be accessed through your MasterCard debit card, by transferring it to another financial institution or by redeeming it for gift cards to a number of online retailers (which often includes a bonus of up to 12%).

What other tools do you use to organize your finances, save more or stay motivated to work toward a goal?

Mandi Ehman at Organizing Your Way