Over a year ago Jake suggested that I read the book “I Will Teach You to be Rich” by Ramit Sethi. After finishing it in just days I immediately realized the importance of setting up a savings account that offers interest and sub accounts. The author puts great emphasis on automating all of your money in order to focus on the bigger picture and your long term goals. I’ve now had my Capital One 360 account for over a year, setting up and funding a new account was a piece of cake and I couldn’t be happier with their services so far.
Savings accounts really matter because they’re where you save for mid-term and long-term goals: your wedding, house/car down payment, vacations, emergencies, etc. To get started you need to determine your monthly expenses. The first step you want to do in your financial plan is have an emergency savings account with 6 months of expenses available in case of job loss, medical emergency, car repairs, etc. This account should not be touched unless it’s an EXTREME emergency. So if you spend let’s say $3000/month, your emergency fund should have $18,000.
Next, set up sub savings accounts for your various short term savings needs. Some needs that come to mind are:
-House Down Payment
Capital One will allow you to set up an automatic deposit from your checking account into each of the sub savings accounts monthly, weekly, daily, whichever you choose to do. Think about this: If your friends call you up and say “Hey, let’s go on a trip this weekend,” you’re not going to be like, “Hang on girls…let me transfer money from my “wedding fund sub-savings account.” Having the sub accounts is key because you are way less likely to transfer or spend the money in your account than if all of your money is setting together in a checking or savings account.
I use monthly automatic transfers to funnel money into each of my sub-accounts. Currently, I only have two accounts set up with Capital360. I have an emergency fund & a house down payment. Now that these accounts are in place, I’m getting closer to each of my goals automatically, month after month, without having to remember to set money aside. I have already saved for 6 months of emergencies and am working towards being able to put a 20% down payment on a house.
When you don’t see the money and it’s automatically transferred into these sub accounts you will never miss it. However, a few months later, you’ll be amazed at how fast you’re accomplishing your goals. I have only had my account for a year now and cannot believe how much more money I am able to save than I was previously.
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