Dreaming of a new car, bigger home, dream vacation? Dedicated savings accounts can help you get there!
If you’ve checked the box on an emergency fund, putting away about three months of salary to spend only when the unexpected happens, you’re moving down a solid path for financial success.
Now, it might be time to add some dedicated savings accounts to your portfolio, especially if a big purchase or financial goal, such as a new car or bigger house, is the next item to check off on your list.
Dedicated savings accounts aren’t some kind of complicated financial vehicle. They simply are savings accounts that you open and dedicate for a very specific purpose. So, for instance, if you’d like to buy a minivan for your growing family, you’ll open a special account to sock away money for a down payment toward the vehicle.
If you’ve had trouble saving money in the past for specific purchases, you’re not alone. In a recent Bankrate.com survey, 21% of respondents said they save none of their annual income for retirement, emergencies or other financial goals. Another 20% saved just 5% or less.
Dedicated savings accounts may just be the tool you need to reach your goals. If you have big plans for your future, here’s why you should consider opening one or more.
You can set up direct deposit.
Money is out of sight and out of mind when it’s deposited directly from your paycheck into your dedicated savings account. And that means you’re more likely to regularly sock away money in it because it automatically happens each time your employer cuts a check.
It makes it easier to save.
You may have big savings goals, but bills coupled with daily expenses, whether it’s lunch out or a surprise home repair, can quickly eat into your pot of money.
With a dedicated savings account, the funds are no longer co-mingled in your main account where you draw money to pay off bills or pick up lunch. It requires you to take another step or two before you can dip into the account, which means you may be less likely to pull cash out to cover your regular expenses. And, if you keep out of the account, you’ll likely end up saving more money more quickly.
You can watch it grow.
Whether your goal is $20,000 for a home down payment or $3,000 for a cruise, you’ll have to do some math when the money is mixed up in your regular account to make sure you have enough to cover bills and are actually saving money.
But, in a dedicated savings account, you can really watch your money grow and know immediately how much you’ve saved so far. As you see the balance move closer to your final tally, you can take pride in your hard work and may be even less likely to dive in and take money out to cover other costs.
You’re less likely to go into debt.
When you have all the money you need saved for a specific purpose—a $2,000 beach house rental, for example—you won’t end up racking up credit card charges which, thanks to interest rates, can make your purchase even more costly. That’s because you’ll have the cash to cover it all.
Saving money isn’t easy, especially for those already living on tight budgets. But, for those with big dreams, a dedicated savings account can be a useful solution to keep you motivated to save.
The CESI Team is committed to helping you reach your financial goals. If debt keeps you from living the life you dream of, contact us for a free debt analysis today and get started on the road to a brighter future!
Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.
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