This is my favorite of our bank accounts! Over the years it has paid for new windows for our house, paid off my student loan debt, took us on yearly vacations, let us take weekend trips with friends, helped fund Christmas every year, and given us a cushion of financial comfort. I think this account was the original reason why I ended up loving the idea of saving, why I got excited every time I knew my money was transferring.
Creating a short term savings is easy. Here’s the steps:
- Decide how much you can put into this account. When you are creating your budget, pick a specific amount that you want to go into this account. My general rule of thumb is that I want to be saving about 15% of my income. I put more into my long term savings (probably 9%) and a little bit less into my short term (the remaining 6%). I know, for some people this seems crazy! Who can put that much of their paycheck into savings?! Trust me though, you can do it! Think of it as paying yourself! If you have something specific you’re saving for, figure out how much it costs and divide that by how long you have before you need it. If you need specific help with this, email me! I’m happy to help you figure out your exact numbers!
- After that, it is literally just opening up another account to your already existing bank account. The benefit of having multiple accounts is that you can separate the different ways that your money gets spent (I’m going to be writing another post soon about setting up your different accounts. I’ll put a link here when I do).
- The next step in creating your short term savings is to start an automatic transfer into it. Usually this needs to be done in person at your bank. I suggest setting up a meeting with one of the bank managers because otherwise you might end up waiting awhile if you just walk in. You pick a day of the month and an amount of money that you want to transfer automatically and they put it in the system for you. I have my automatic transfers go through twice a month because we get paid bi-weekly. That way I know the money is always in the account for the transfers.
- Don’t touch the account!!! This is easily the most important. As you see that money start accruing, it’s going to be tempted to want to “reward yourself”, but remember that your reward comes when you are able to pay cash for some big ticket items that previously would have went on a credit card. Here’s to not paying any interest! Cheers!