January Money Diet Day 25 – Open an Inconvenient Savings Account

Inconvenient savings account | January Money Diet

Maitland Bank South Australia

I don’t know about you, but there are two scenarios that seem to spell “CREDIT CALAMITY” for me:

1. Unexpected Expenses

The one certainty, for each of us, is that unplanned things will happen that cost money. We want to do extraordinary things with our money and live debt free, but to support those goals we each need an emergency savings account. Otherwise we’ll be scrambling, and risk losing the momentum we’ve worked so hard to build.

How much do you need to set aside? That will vary depending on your situation. Dave Ramsey recommends first establishing a $100 emergency account, and then building it to $1000. My health insurance annual deductible is $1750, so I need to account for that, too. Suze Orman recommends setting aside six months of income so that you can withstand a job loss, and that makes sense, too.

Some years ago on the night before a “landmark” birthday, our sewer line broke and I had to pay $7,475 that very week to have a new line installed from our house to the street. My friends, I didn’t happen to have a spare $7,475 sitting around. If I had, I assure you that I would have spent the money celebrating my birthday in France on a first class wine- and croissant-sampling tour.

Instead, I ended up paying for part of the new sewer line with a credit card, and part with a bank line of credit. It took me four years to pay it off.

If you think that’s a crappy way to get in debt, I happen to agree with you.

2. Unplanned Travel Opportunity

Copenhagen | Happy Simple Living blog

Copenhagen – photo by John Anes

When my daughter was accepted in a foreign exchange program in Denmark, I couldn’t resist going for a visit. We took a side trip to visit friends in Spain, since we were in the same general vicinity. (Spain and Denmark are close, if your geography knowledge is like mine).

The trip was wonderful and I don’t regret it, but what I do regret is that I didn’t have a funded vacation account. With no money set aside I charged that trip to my Visa, even though I hadn’t finished paying off the **sparkling new** sewer line yet. That eventually led me to have $12,000 debt spread over four accounts — and too many sleepless nights to count.

The Savings Solution

For me, the way out of my mess was this:  I opened three savings separate accounts at my credit union.

Account #1 – Emergency account

Account #2 – Vacation account

Account #3 – Freedom account – where I stash a set amount of money each month for large annual expenses like insurance, taxes and HOA fees.

Why It Works for Me

This credit union is not connected to my regular bank, and I don’t have a checking account there. I declined the free debit card they offered me. When I want to withdraw money, I have to drive over there and talk with a human to get it.

This is an important key for me! While my regular bank offers a savings account connected to my checking account, it’s too convenient to transfer the funds electronically and therefore the money never really accumulates. Having an inconvenient savings account makes it tougher to get the money out, and I need that.

Some may argue that savings accounts pay pitifully small interest rates, and while this is true it doesn’t matter much if you’re just saving a few thousand dollars for short-term use. As your balance grows, you can transfer the money away to another inconvenient place that pays a higher interest rate.

Safe and Sound

The credit union’s interest rates are a little better than the bank’s, but the real appeal for me is that the account is FDIC-insured and the principal is not affected by the economy or market fluctuations.

The credit union doesn’t charge monthly fees, and the nice folks there will happily open as many savings accounts as I like with a $25 minimum balance.

Both of my children have learned about saving money with their credit union accounts, and the credit union gave my daughter her first car loan when she was 16.

For simple, short-term savings, I’m a big fan of the credit union.

Make It Automatic

When I worked for the publishing company, I arranged to have a set amount withdrawn from each paycheck and sent directly to a savings account. If your company offers this benefit, I highly recommend it as a painless way to build real wealth. If it seems impossible, start with a small amount. You’ll love seeing that balance grow, and with time you’ll be able to increase the amount.

I started having just $25 withdrawn from each bimonthly paycheck, which added up to $600 a year. I eventually eased that up to $50 a paycheck after my next raise, and then $100, until eventually I was having $200 a check sent to my savings account — which added up to a nice $4800 a year. The funny thing is, I really didn’t miss the money — as long as it didn’t have a chance to pass through my fingers.

Now that I’m self-employed, I budget for savings each month and pay the amount just like a bill. It takes a little more self discipline, so having an inconvenient place to stash the savings really helps.

Challenge #5 – Open an Inconvenient Savings Account

During the January Money Diet we’re tackling 5 challenges to strengthen our relationship with money. In case you missed them, the other four challenges are:

Challenge #1 – Give 31 things away.

Challenge #2 – Figure your net worth.

Challenge #3 Do something to earn an extra $25 or more this month.

Challenge #4 – Reduce monthly expenses

Your challenge between now and February 1, if you choose to accept it, is to take the money you earned during Challenge #3 and open a savings account in a place where you can’t easily transfer the money back to your main account. If you don’t currently have an emergency account, you may wish to earmark the fund for unplanned expenses. If you do have a funded emergency account, you may wish to set up an account for another purpose.

If you’re interested in joining a credit union, you can learn more and find one at MyCreditUnion.gov.

Once you’ve accomplished this task, leave a comment on this page so we can cheer for you! If you already have an inconvenient savings account, or another system for managing unplanned expenses, we’d all LOVE to hear your strategies and thoughts.


The signature for Eliza Cross

About Eliza Cross

Eliza Cross is a full-time writer and the author of a dozen books about food and home design. She has been blogging about simplicity and sustainable living since 2006.

January Money Diet Day 25 – Open an Inconvenient Savings Account

  • Kimberly

    This is something everyone needs.I make a goal of saving every $5 bill and at the end of the month deposit it into an Christmas acct that I can’t get into until November. I use this either for a vacation or other years I just rolled it back into next years account. The teller that I first started with is always impressed so she finally started to do it and Friday when I went in with my monthly $5’s she told me thank you and what she had did with her yearly $5 savings. She ended up with over $2000 and is going on a trip to visit family that she hasn’t seen in years. Every cent counts and if we all try to save what we can, we will survive and maybe even thrive

  • Virginia

    This was a challenge until we realized that we already had an inconvenient savings account during out annual budget review. Completely forgot we still had an account at our former bank. We switched when we moved 5 years ago and totally forgot about the small incidentals savings account we still had open. Will use it now to help save for our family vacation.

  • Colette

    I only use cash. When the cash is gone, I don’t spend any more money. I already have more than one “inconvenient” savings account. When I deposited money into these accounts, I took the attitude that they were “payments” and I never dipped into them. I also have a habit of hiding money around the house. It is always a nice surprize to find $800 hidden in a lingerie drawer or $1,000 under an antique teapot!

  • Wanzer

    I opened an “inconvenient” online saving account with automatic biweekly deposits. Looking forward to seeing the balance grow monthly. Thanks for the challenge!

  • Helen Shaw

    This is a tough challenge to meet, I have debts and therefore it makes better sense to pay those off rather than save into an account. I have however resolved to build up a little each month so that I have some ready money but will concentrate on driving down my debt. I know it’s going to take time to become debt free and that has to be the focus as every £1 of debt costs me a lot more than a £1 in savings. I know I will find it reassuring to know I have real money available should I need it but I think that for now at least I will work towards having £300 saved and when I get beyond that will put every bit of spare cash into clearing debt. The January diet will continue month on month and I’m going to keep referring to it and your site to make sure I stay committed. I know I am very stressed about money and my debt so this is necessary for my health. Wish me luck!

  • Kelly

    I already have some, but I deposited the extra money I made into it, and reviewed how much I funnel into it from each pay.

  • Lynn Louise

    I opened an online savings account with my credit card company. The interest rate is 5 times the national average. Plus it’s harder to withdraw than just running down to the bank. I haven’t touched any of it and don’t plan to. It’s a great account.

  • Annette

    This is a great idea – I opened an “inconvenient” savings account about 8 months ago. It is not connected to my debit card and I have to physically go to the bank and talk to a teller to get any money. I have the bank debit my checking account $125 every payday and this automatically goes into my savings account. Also, anytime I use my debit card that is connected to my checking account the bank automatically transfers $1 to my savings account. It’s not a lot but I save an extra $15 to $20 a month – every little bit helps!

  • Kathy

    All great advice! When we first started our emergency fund, we made a pact not to spend $5 bills, instead we save them and put them into our emergency fund. Sometimes it seems as though the world knows of our saving strategy…pay for something, that is under $5, with a $20 and we normally get $15 back all in $5’s. We also put our tax returns into our emergency fund.

  • Catharine

    This is a great idea.

    I am going to put my left over change into one, I usually pop it in a jar then let the girls spend it, but prom dresses are going to be wanted soon, so the change can amass for them.

    I thought of this before but was put off by low interest rate so saved a bit in my higher interest account, only for it to be swallowed up in housekeeping . So off to the inconvenient bank , no interest is better than no savings. Thanks for the reminder Eliza.

    C x

  • Jessica

    I have an inconvenient account and auto deposit from my paycheck and it really does force you to stick to your savings plan. Another thing I have started to do to increase my savings is redirect anything I save from my grocery receipt challenge. It’s rewarding to come in under budget and know that it is going to savings, not just being spent elsewhere.

  • Lynette

    I have a separate account and for the first time I am planning on building an emergency fund. I have deposited my first amount and plan to transfer money earned from my ebay sales this month into it. I have never been able to save money in the past but I am determined this year.

  • Vesta

    My BEF is at a separate bank from where I regularly do business and I have to physically travel there to access it. Since I am trying to build that up a little more this year, I put the $25 I earned there today on my way home from work. Every little bit helps!

  • Mila

    Such great practical advice! This is something I have done for years and it works! I have 4 different savings accounts (three in credit unions). 1) emergency fund 2) taxes and savings toward large items 3) Christmas and occasions (I have a Hugh family and have to save this way) 4) savings in general. The last one is where I save until I have enough money to put in CDs, bonds, stocks, money mutuals and other investments. For example, we have three rental properties that help augment our retirement and SS checks. They are all paid for and have been for a few years now. We really have tried to diversify…not all eggs in one basket mentality.
    Saving is the KEY to peace of mind for yourself and your family. It’s a slow accumulation that takes years. It pays off!!
    One thing my investment banker suggested is have money in short term CDs. That way, if you have an emergency expense you will have money to use for it while drawing a slightly higher interest rate (than savings) in the mean time. I have several CDs that are 3 mo, 6mo and one year. That way I usually have one renewing and could cash it out free of penalties. These are strictly emergency money b/c the are really not great investments. It’s the same idea you talked about in this article of having to physically go get your money out.
    I do so much better if I have distance from our money.

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>