By Sabrina Karl
Saving is a pretty wide catch-all. It can mean stashing cash for a rainy day or emergency. Or socking away funds for retirement. Or working towards a specific savings goal like a house down payment, a new vehicle, or a big vacation.
Often, it is several of those at once. But if you’re using a single account to lump all of your savings together, it can be hard to know how much progress you’ve made, or where you need to shore things up.
That’s why it’s smart to track your status on different goals, and savings buckets are a great way to do this. By earmarking your various contributions for their intended goals, you can keep certain funds intact and available (important for an emergency fund, for instance) and can easily see your status on reaching other goals.
One of the easiest ways to employ savings buckets is to simply open more than one savings account. You can do this at the same institution, or you may want to open a high-yield savings account elsewhere, as a way to earn more on your money while making access to those funds less tempting.
Another option is to choose a bank that offers savings buckets as a feature. This newer offering allows you to keep your funds in a single account, while using online banking to designate which funds belong to which goals. With each contribution or withdrawal, you then earmark which bucket to use.
Of course, there is also the old school method of handling the accounting yourself via a spreadsheet or even a paper ledger, tracking how much of your account balance belongs to each savings category.
No matter your method, the awareness that comes with earmarking and tracking your savings can be a powerful financial tool.