Old-Fashioned Savings In A Digital Era
Maybe you remember your Mom getting cash out of her “grocery envelope” when she went to the store. I do.
The paper “envelope system” still works for people who deal in cash, and is not a dead concept. It’s been around for a long time. It’s just now we’ve evolved from carrying cash to using debit cards and credit cards.
There’s nothing wrong with cold, hard, cash, but in our “convenience era” many of us like the ease of whipping out our debit card to pay for things.
We, personally, are the credit card consumers who buy everything with credit cards and pay the card off every month. This way we get reward points and dollars which is like free money. I like free money.
Disney Here We Come!
When we had our son, my husband said, we need to start a Disney Fund! Now you have to understand that my husband likes to do trips in as high a style as we can afford.
Going to Disney doesn’t mean staying at the Days Inn for him. It means staying on the actual Disney property with all the bells and whistles.
We agreed this was a long-term savings goal, because if we were going to spend all this money on a trip of this magnitude then we wanted our son to be an age when he would remember it, and it was going to cost a lot of money.
So our Disney Fund idea morphed into other fund ideas as we started talking more and more about budgeting.
Saving For Big Ticket And Long-Term Items
The more we talked the more we realized that there are just too many things in life that are essentially “big ticket” type items that we need to budget for.
When your budget is tight, or your paychecks are inconsistent, or maybe you’re commission-only type employees, then there are months when it can be hard to shell out $140 for a car repair AND pay a medical bill of $225 AND pay for your kid’s baseball registration too.
So we agreed that most single purchases that were over approximately $100 that were not month-to-month type items like mortgage, car payment, etc. needed to have a savings fund.
Clark Howard Gave Me A Clue
Clark Howard is Atlanta’s famous frugal icon and deal finder. He is all over the radio, TV, and podcasts sharing his financial wisdom to help consumers save more and spend less.
I was listening to him one day as he was reporting on high interest online banking. He mentioned EmigrantDirect.com as a reputable online bank that was fee-free and would allow you to set up multiple savings accounts attached to your checking account.
That got me thinking about a way to budget all our big ticket items.
Using Online Savings Accounts
We’ve used EmigrantDirect.com for about 10 years now. At the time, the interest Clark Howard had been touting was around 5%. But over the years the market has changed, and now the bank only offers .50% interest.
We’re not in it for the interest earned on our money. We’re constantly shifting money in and out, so it’s not as though a huge “pot” of money is sitting there with interest ready to earn anyways.
We’re in it for the ease of creating our “digital envelopes.” EmigrantDirect.com does the trick.
We have 20 savings accounts with them…give or take one or two.
Let me explain. I know it’s a lot, and it sounds crazy out of control. But it really works for us.
Make Your “Digital Envelopes”
If you sit down and think about your purchases in a year, you will be surprised how many things are worthy of a savings fund. Add to that the long-term savings goals you have that are beyond a year. The big trip, college, new car, etc. There’s a lot you can think about and save for, and the sooner you start the better off you’ll be.
The one big pot of money approach is too easy to cheat on yourself. Making separate funds allows you to see each pot of money and how it’s all adding up. Having separate pots or “digital envelopes” let’s you clearly see which money is earmarked for what.
And just because it’s earmarked for a specific item doesn’t mean you can’t touch it. If you have an emergency situation, the money is there. Just UN-earmark it! Withdraw whatever you want, when you want.
You Choose Your Envelopes:
Below I’ve listed our various envelopes to give you ideas of what to save for to make your household budget work better. Yours may look totally different.
You may need different funds. The point is that you can brainstorm all your big ticket items and decide how to approach your savings.
Here are ideas:
BRACES FUND– My kid is 11, but even 2 years ago it was clear that he was more than likely going to need braces some day. So we started saving a little each month.
Even if all his permanent teeth end up straight, well great. Now we’ll have a nice chunk of change to put towards something else.
AND there are some orthodontists who will “match” you in a savings fund when you’re ready to sign up for braces. If you can walk in the door with $500, $1000 or more, then you’ll get that much “free money.” It’s a no brainer.
Start saving even $10 a month when your kid is 5 and you could have close to $1000 by the time he needs braces.
ANNIVERSARY FUND- The first few anniversaries rolled around and we went out to dinner. Then it became apparent that if we wanted to ever take a trip then we would need to save up money for that. Funny how that works. Now we save money each month to be able to afford a one-night stay and nice dinner somewhere.
ANNUAL PEST CONTROL MAINTENANCE FUND- We bought new A/C units many years ago and opted for the service plan. Take the cost of your plan and divide by 12. Now you have how much you need to save each month.
ANNUAL PEST CONTROL MAINTENANCE FUND- Same as above.
SUMMER VACATION FUND- We tend not to save month to month for this fund. Instead we use our tax refund money. We just dump it in here till we decide on a vacation.
BIG SHOW FUND- Yes I really call it that. Think about it. You want to take your family of 4 to see Cirque de Soleil or go to Six Flags over spring break. Maybe you and your honey want to go to a concert?
Add up those ticket prices, parking fee, food and drink, and you’re at a minimum of several hundred dollars.
Do you have an extra $300-$400 in your budget in any given month? Probably not. You kind of need groceries, and your kid needs new shoes for $80.
So we started sticking $10 in a fund every month for that day when we decide there’s something in town that we really want to see and do. We won’t have to let it pass by.
This is a fund that can literally sit untouched for years at a time. Figure out how often you go to a “Big Show” to determine how much you need to save.
And admittedly we’ve sometimes dipped into this fund, not having the full amount needed to cover the costs, but gosh, it sure was handy to be able to have half of it even saved!
MEDICAL FUND- You can never have enough money for medical bills. Never. You may get a certain amount of cash benefit from your employer, but you will always need more. Sock away what you can, and let it just accumulate.
VISION FUND- Yes, this is separate from medical. If you have glasses and/or contacts lens wearers in your family then you know there are always glasses and lenses to buy. Almost every year.
At least for contacts. Not to mention the exam costs. Estimate what you spend in a year on everybody and divide by 12. Here’s what you need to save every month.
CAR REPAIR FUND- This is just about an endless category too. The last car I had I bought used. I had it for 6 years or so, and sold it for cash. I had even put a “new” refurbished transmission in it.
Out of curiosity I added up all my repair bills, new tires, oil changes, etc. that I had done to that car over the time I owned it.
This gave me an estimate of “monthly upkeep costs” and it came to $66 a month. That was just for one car.
And don’t forget to add up your car registration fees. Those could amount to several hundred a year.
You could easily put a minimum of $50 a month in a “car fund,” and you’ll never keep up.
If you expect to buy a new car in a certain time frame, then this savings fund could also easily double as a down payment savings for the next car.
What about a car for your teen? Think ahead. Do you plan to hand a car down to them? Will they need a car to get to school or athletic practices or a job? Then you may be looking at buying a cheap used car.
My kid will have a license in 5 years. I need to start saving now.
CHRISTMAS FUND- You KNOW you need to save for Christmas. Or maybe this is where your tax refund goes? Or that bonus you get?
Get out a long sheet of paper and make your list of everybody you buy for. Don’t forget the teachers and neighbors, and in-laws, and everybody who’s anybody on your list.
Holiday cards, stamps, photos, party hostess gifts. Everything attributable to Christmas.
If you throw some grand party every year, then you could even factor that in if you’re buying a lot of food, drink, and decorations.
Then realistically figure out how much you spend on each child and spouse, and create a grand total.
And don’t forget the stockings….good gosh they are expensive to fill!
You know the drill. Divide by 12. This is how much you need to save each month to be ready for Christmas!
AND the beauty of having this fund, is that you’ve been building it up all year long, so if you want to start your Christmas shopping in September, then the money is there!
HOME IMPROVEMENT/MAINTENANCE FUND- This is another biggie. You can never have enough money in this fund either.
As a homeowner there’s always something that needs to be done. This is for the new lawnmower, new dishwasher, to repair the dryer, hire the plumber, pay the electrician, hire the gutter guy, etc. The list is endless.
This can also be for the new furniture you plan to buy, or the painting you plan to do. There’s always something!
HOA DUES- If you have a homeowner’s association and you pay annual dues, then it’s simple math. Divide by 12. Save it every month. Now you have the total payment when it’s due.
“CHILD” ACTIVITY FUND- My kid needs to be doing something fun and productive during school breaks. And I work, so he still needs “childcare.”
In addition to this he plays various sports during a year. I add up the registration fees of everything, and try to come up with my best guess for his activities. Divide by 12, and that’s what I need to be saving each month.
WEDDING FUND- Ok, now you think I’m crazy. But if you have girls, girls, girls, then start saving your money! Start when they’re born!
COLLEGE FUND- This is a fund you could start in this “online savings” space, and then when you’ve saved a certain amount you could shift it over into a different college savings plan that might be more beneficial for tax purposes.
SUBSCRIPTIONS- If you have any annual type of subscriptions for a service like Amazon Prime, software upgrades, memberships, or the like- you could create a fund. We subscribe to Sirius XM radio and it’s an annual payment, so we compute our monthly amount and save it up for that one time charge.
EXTRA MORTGAGE PAYMENT FUND- This fund sits empty all year except for the 2 months a year when my husband gets a 3rd paycheck. On each of the 3 paycheck months we save half the cost of our mortgage, so by the end of the year we will have one extra mortgage payment’s worth of money. We apply that extra payment to the principal to pay our mortgage down faster.
BIG SURPRISE GIFT FUND- This may seem funny, but my husband and I were talking money one day. Since we combine wages for the household budget he was a little frustrated to think that all of our money is earmarked for this big thing called, “life.”
What if he wanted to buy me a special big gift one day like for our 20th anniversary? How would he be able to do that? So we made a fund.
We are about 8 years away from that particular anniversary, but at $10 a month we’re on our way to a surprise gift!
TRAVEL FUND- This is my newest fund. My married daughter just moved 16 hours away. That is not a car ride for me, so now I have to start saving for airfare!
My husband doesn’t have a travelling job, so we don’t have the benefit of getting too many frequent flyer miles. They come in dribs and drabs, and take a long time to acquire.
We do have some credit card rewards I will earmark for airfare, but I still need to anticipate saving a little each month for airfare and fun things to do while we’re out of town.
With a family of 4 if we are all to travel by air, then we could easily spend $1000 on air in one trip, hence the Travel Fund.
NEW COMPUTER FUND- Ah, the joys of computers. We have come to realize that our home computer lasts about 5 years or so before we need to buy a new one.
Nothing like the blue screen of death.
So when we bought our last computer we took that amount, divided it by 60 months (5 years) and immediately started saving for the next one. Seems crazy, right? Crazy as a fox I say.
Whew! That’s A Lot Of Accounts!
It’s Easy and Flexible
My digital envelope system is so easy and flexible. There are no fees of any kind, and it should be obvious by now, you can set up an unlimited number of accounts.
I have EmigrantDirect.com attached to my checking account at an entirely different bank. Every month I just transfer dollars over from checking to my various savings funds.
There are other online options that allow you to set up multiple accounts for free. Many more options have sprung up since I first started 10 years ago.
When I move money to EmigrantDirect, it’s not instantaneous like transferring dollars from within your same banking institution. It can take a few days for the money to show up, but that doesn’t affect me.
And depleting accounts is not a problem. We don’t have to keep minimum balances. I will take a fund all the way down to $1.42 if I want to.
You Make Your Own Rules
While I try to stick to the digital savings as best I can, there is an occasional time when I’ve depleted say, the “Home Maintenance” fund, for a repair of some sort. And then I have to turn around again, and make another repair the very next month. So there are times when all the money isn’t there when I need it.
I will from time to time have to steal from Peter to pay Paul, and shift money around to make things work.
How It Works
When I need to pay a medical bill for example, I just login to my EmigrantDirect online account, and move the money from the Medical Fund back into my checking account. It will again take a few days to move over and really be there. At that time I am now ready to pay the bill.
Our monthly income is constantly shifting, our family needs change over time, and our “wants” change too. Therefore our budget is ever-changing.
I regularly “play” with the budget, moving money here and there, based on all these changes, and our “digital envelopes” change too.
We didn’t just start with 20 accounts. We’ve played with this savings idea over the years, and added different funds along the way as we’ve found new things we should really be saving for.
And likewise we have eliminated accounts. Not closed. Just eliminated and renamed. Remember that Disney Fund? We saved and saved and saved for close to 9 years. The day finally came when we surprised our son for his 9th birthday and took him to Disney and Universal.
We didn’t have to stress out over the money because it was there. We planned for it. We had it. It was an awesome and memorable trip.
That Disney Fund sure got totally depleted. It’s now been renamed the Wedding Fund. Ha. Moving on to the next big thing…