We all know we should be saving money. It can be hard to find and keep the motivation to do it, though.
Rather than focusing on the general goal of saving, it's helpful to have specific goals that you're saving for. You know you want to save money. Making specific goals can help you realize them. For example, instead of just saving for "travel", save $2,000 for a family trip to the Bahamas. The specificity helps you stay focused, measure your progress, and know when you've achieved your goal.
Define your goals
A good financial goal will be specific and measurable. It'll have a time frame you want to complete it by, and a clear amount you're aiming to save for a specific purpose. If you're saving for a trip, for example, you should know where you want to go, when you want to go, and at least a rough idea of what you'll need to spend.
You can start your goal-setting process with a brainstorm on a sheet of paper. Write down what's important to you, and zero in on the things that will cost money, that you'll need to save for. If you have kids, your top goals might include college education, family travel and the all-important emergency fund. The categories should represent your values, and the priorities you have for how you want to spend your money.
Once you've identified your financial priorities, take some time to research them and find out what they cost. How much does that dream vacation go for? What will you really need to save for your child's education? Answering these questions gives you the info you need to make clear savings goals for yourself.
Use targeted accounts
Once you've laid out specific savings goals, it's time to set up targeted savings accounts. Instead of letting your savings just sit all together in a single high-yield savings accounts, you can set up individual accounts for each of your goals. This makes it easy to see the progress you're making on each one.
Online banks make it easy to set up targeted accounts. You can easily access them all with one simple login, and see where you stand with each goal. It's easy to move money between accounts, and to make deposits via direct deposit or bank transfers.
Best of all, online savings accounts typically pay better interest rates than you'll get at a brick and mortar bank. While you're keeping your money more organized and watching your savings grow for specific goals, they'll also be growing faster than they would if you had just left your money sitting in your local bank.
If you're a Mint user, you can make your targeted savings accounts even more powerful by connecting each one to a Goal in Mint. That will keep track of your progress for you, and show you neat charts as you go along.
Three must-have accounts
Whatever your savings priorities, there are three accounts you must have:
- An emergency fund
- A retirement fund
- An account for some medium-term goal like travel.
That third account is important for staying motivated to save. You want a goal you can achieve in a reasonable amount of time, while putting aside savings for the long haul.
Your emergency fund should be readily accessible cash in a savings account. If you have retirement savings available through an employer, you may not need a separate savings account for that. If you don't, though, you can use a savings account to set aside your retirement funds before investing them in an IRA.
Regular saving is key
You can have as many goal-oriented accounts as you want. It depends on how you've ordered your financial priorities and what you're able to save. Over time, you may find that your goals and priorities shift, and with them so does your roster of savings accounts. The important thing is just to keep saving, consistently and regularly, for the goals you've identified. And since you're choosing so many different accounts, be sure to do your research to determine which savings account is best.
Not only will targeted savings accounts help you more clearly see your goals and the progress you make, they may actually help you save more. When you can see the progress you're making on a goal, you may be more motivated to put a little extra money into that account rather than splurge on something trivial.