Is there an easy way to save money for large expenses?
I was enjoying a meal with friends when the conversation turned to my post about saving for Christmas expenses by utilizing a Christmas Club Savings Account.
At the credit union where we all happen to bank, Christmas Club Accounts are actually sub-savings accounts.
One friend casually mentioned that she has multiple sub-savings accounts that she uses to save for all of her large expenses.
Even though I have banked at the same credit union my entire adult life, I had no idea that multiple sub-savings accounts were an option.
After contacting my credit union to confirm their current availability, I did a quick internet search.
Many financial institutions offer sub-savings accounts.
How could I not know this?
Utilizing sub-savings accounts to save money for large expenses is a financial game changer.
What is a sub-savings account?
A sub-savings account is a savings account that exists within another savings account.
Picture a filing cabinet. One drawer is the main savings account.
Each file folder stored in that drawer represents a sub-savings account.
Without the drawer, there is no where to organize and store the file folders.
How do you set up a sub-savings account?
First, it’s necessary to have a main savings account.
If you’re opening a savings account for the first time, make sure sub-savings accounts are included.
If you already have a main savings account, check with your financial institution to ask if sub-savings accounts are an option.
My credit union requires an in-person request at a local branch.
Note: When opening an account, or creating a sub-savings account, make sure there are no fees or minimum balance requirements associated with the account.
Put your sub-savings account to work.
By following a few best practices, a sub-savings account can be a true financial workhorse.
Name the account.
Be very specific.
Any expense that has the potential to derail your budget should have its own account.
Christmas, taxes, car repairs, travel; if there is something for which you want to save, create a sub-savings account.
Set a savings goal for each sub-savings account.
Again, be specific. What is the ideal amount needed to meet that expense.
Using taxes as an example, history is a great indicator of what the goal amount should be.
Determine the timeline of meeting the goal.
By when do you expect to need the money?
Calculate what the monthly transfer amount should be.
The savings goal divided by the number of months until you need the funds will tell you what the monthly deposit should be.
Example: A savings goal of $1,200.00 with a timeline of twelve months would make the monthly deposit of $100.00.
Review your zero-based budget to determine how often and from which pay you are able to transfer the funds.
The savings goal becomes a fixed expense.
Make the transfer automatic.
The easiest way to ensure that you save money for large expenses using a sub-savings account is to make the transfers automatic.
Repeat this process for everything for which you would like to save.
Don’t get discouraged if you aren’t able to start multiple accounts all at one time.
Start with using a sub-savings account to begin saving for one thing.
Would you like to have an easy way to save money for large expenses?
A sub-savings account is the answer for which you’ve been looking!
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