Spin-off thread - savings accounts and their uses?

[NuggetBrain]

So my previous thread got me thinking about savings accounts. Right now we only have two - one attached to our checking account and one at another credit union. We'd like do set up the following savings accounts (we have about $1400 to save a month):

An EF (but we're not sure the best "saving method" for this. Money market account? Regular savings?). After debt pay-off, begin by putting all savings to this until it's built up to $6,500 which is 3 months. Then put $500 in per month until it's built up to $17k which is 6 months. Then roll the monthly money into creating a Roth IRA for my husband.

A "short-term" savings - this would probably be set up at our other credit union and for things like vacations, gift-giving, a computer, annual one-time expenses, pretty much anything that we plan to purchase within the next year that isn't in the regular budget. $300 in per month.

A "long-term" savings - I'm thinking maybe setting up an account through Ally or ING (only because it will be just hard enough to get the money that we won't spend it on anything impulsive). So the downpayment fund, new car fund, our 5th year anniversary Greece trip, etc). $400 in per month.

My husband would also like to have a "splurge fund" in the savings account attached to our checking. The idea is to keep about two hundred in there, for the times when we feel like having a splurge (a nice dinner out, an overnight up in Duluth, etc). Whatever money isn't spent at the end of the month gets rolled over into our short-term savings.

Thoughts? Does this sound like a good savings plan? This is not including retirement, which we will be also funding (6% with match for my husband, a fully funded Roth IRA for me.)

[NuggetBrain]

Okay....anybody else? Anybody? Bueller?

[Petunia 100]

I think it sounds like a fine plan.

The only caveat I have is that your retirement savings at first glance seems on the low side. Does 6% into husband's 401k + 5k into your Roth equal 15% of your gross income? If so, just ignore my caveat. If not, keep in mind that you want to work towards 15%.

[BMEPhDinCO]

Sounds like a good plan to me - over time you may want to break down some of those more (like the Greece trip separate from car/house) but I think that'll give you a good start to learning how to work with multiple savings accounts.

I would keep all of them at Ally or whatever high rate online bank you feel comfortable with. They are easy to link to a credit union account and will transfer the money in 2-5 days (depends on if you try to do it on a Thursday versus a Monday). The EF will be safe in an account like this and still earn a (reasonable in this time) 1% or so...make sure you pick an account with a card and/or checks so you can access it directly in an emergency.

I agree with your husband that a splurge fund is great - it makes celebrating special occasions so much easier since you can enjoy them without worrying about how to pay for them!

I think that if, after hitting 3 months on your EF, you redirect the funds to your husband's Roth and max it out, that's good for retirement.

Congrats and good luck!

[NuggetBrain]

Petunia - if we stay with the 6% towards his 401k, and 5k in a Roth that puts us at 9% of our income. But after we have a good EF set up, I'll be diverting that money into another Roth for my husband which will put us at 15% exactly.

[artwest]

Your plan looks pretty good to me.

[Redraidernurse]

Originally Posted by NuggetBrain

Petunia - if we stay with the 6% towards his 401k, and 5k in a Roth that puts us at 9% of our income. But after we have a good EF set up, I'll be diverting that money into another Roth for my husband which will put us at 15% exactly.

Why are you doing two Roths for your husband? You will still be limited to the contribution limit of 5,000 between the two of them. Why not open a Roth for yourself?

[danieldroga]

You have planned it well just make other investments so that it might help you on your future expenses.

[yourmoney]

Originally Posted by Redraidernurse

Why are you doing two Roths for your husband? You will still be limited to the contribution limit of 5,000 between the two of them. Why not open a Roth for yourself?

If you read closely, she has one Roth IRA for herself already. The new Roth IRA would be for her husband.

NuggetBrain, it looks like you've got it all planned out fairly well. I would recommend for your EF and long-term savings accounts to put them all in something like INGDirect. I'm not sure if Ally Bank or others offer this functionality, but at INGDirect you can open multiple savings accounts and "nickname" them. So you could have one SA named Emergency Fund, another SA named New Car, etc. And since you won't be getting money out of these accounts often, the relatively high interest helps.

I think it would be a good idea to keep your splurge fund and your short-term savings accounts out of those if you're trying to fight impulses. The savings account attached to your checking might be the easiest account to get to quickly, so letting that be the splurge account would be fine. By going to your other savings account for short-term savings you won't build a habit of transferring money out of your online savings accounts.

I've got another idea if you're really wanting to fight impulsive decisions. Instead of putting your EF and long-term savings in online savings accounts, put them in medium-term CDs. The interest penalty on CDs should REALLY keep you from doing anything impulsive, especially in those critical first few months.

[feh]

I think some people go overboard on having separate accounts for every bucket. If you need to do that to keep everything straight in your head, ok, but I like things simple.

We have a checking account and a savings account. The savings account is for anything that isn't a monthly expense: EF, vacations, and any large, infrequent expenses (saving up for car, property taxes, home remodeling, etc).

[photo]

Originally Posted by feh

I think some people go overboard on having separate accounts for every bucket. If you need to do that to keep everything straight in your head, ok, but I like things simple.

I do, too. If you constantly put a frugal spin on spending, it should work well.