Separate savings accounts for separate purposes

Separate savings accounts for separate purposes

31 March 2008

While traditionally it is usual to put all your savings into the one account in order to benefit from the maximum interest rate you can, not everyone will benefit from this arrangement.

For many people, dipping into savings for things that are supposedly frivolous-such as holidays-is perfectly acceptable in order to cover vital expenses. Unfortunately, what such people are failing to realise is that this is a sign that they may be overspending on necessary things, justifying the excessive expenditure through virtue of it being on a necessity. A high grocery bill isn't always caused merely by outside factors. If you shop at the same place more out of habit or convenience than the savings on offer, then you are probably spending more money than you need to.

Despite what you may think, you probably need what you're saving for, although in a different way to how you need to pay the bills or buy food. If you've been dipping into holiday savings, for example, it's quite likely that the stress of being unable to afford the holiday is piling on top of the stress that caused you to want a holiday in the first place.

One method of trying to curb your habit of dipping into savings is to set up separate savings accounts for each savings goal. Be careful not to cripple your savings with account keeping fees, however, as there are many institutions that provide accounts without monthly account keeping fees. You will also want to choose savings accounts that provide a minimal level of access and a high interest rate if you don't withdraw for long periods of time. Anything that will discourage you from casually withdrawing money from your savings to take care of other expenses is likely to be a good utility.

You could also utilise a credit card with a limit set to the maximum amount of expenditure you would like to have in a month. You would then pay for everything with your credit card and treat the credit limit as the actual limit of your funds within a month. You would only withdraw funds from your account to pay off the credit card before the end of the interest free period, transferring the remaining funds to your other savings accounts. If done correctly, this method should encourage you to remain disciplined in your spending habits, and save substantially more.

Please browse our site for more information or to apply for many great online savings accounts.

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