Use savings buckets for progress

Families are always looking for solutions when it comes to saving for a variety of wants and needs. The reasons people want to save money might be for a kid's college, a vacation, a new house or boat, or just want to build a nest egg for retirement. As a general rule, whatever we might save for, the money usually gets dumped into a savings or maybe even a checking account, although checking accounts are easily pilfered by our need to pay a bill or what have you. Having one big savings account is common but humans always function a little better at accomplishing things if we have a goal in mind, and some sort of constant reminder about that goal. High-yield savings accounts being the preferred method, as we want to earn as much as possible on our money, can offer a feature many may not be aware of. This feature is called "Saving Buckets," which are like envelopes in the one main account. They let a customer set up categories for each specific savings goal they might have in mind. These are offered by many banks and are free to set up. You can track your savings for a specific item. In other words, if you are saving for a new car, you can set up a savings bucket titled "New Car" and dump money into that envelope. In this way, by having a specific account for an item, it keeps in the forefront exactly what it is you are saving for. You can set up multiple buckets and designate what money goes where. The advantages can be obvious and not so obvious at the same time. Naming an account keeps the specific need right in front of you and may allow you to make better choices as to how much to allocate to it and when. The balance for whatever it is you are saving for is also front and center whenever you check your statements. The concept can also incentivize you to save more and make it easier to track your progress on each specific item. Using buckets under one main account can also eliminate the need for multiple accounts, making tracking your money easier. Additionally, by maintaining only the one main account, the balance would be higher than it would be if holding separate accounts, possibly qualifying you for a better interest rate as banks usually pay more the higher the balance. It may also reduce any fees banks might charge for each account, as the buckets are considered just a piece of the one main account. You can also transfer money between buckets if something changes or even eliminate or cash out a bucket if need be. There are, of course, things to consider when looking at establishing saving buckets. Savings accounts in general may not offer as much return as time-constrained, fixed-income options such as a CD or savings bond. Savings accounts can also see their interest rates move down while CD or bond interest rates might be set for the life of the purchase. Also, savings accounts more than $250,000 exceed FDIC insurance but that particular drawback can be reduced by simply naming an additional beneficiary to an account. This is because each account owner is eligible for up to $250,000 in FDIC coverage per beneficiary. Setting up beneficiaries on your account can increase your FDIC coverage. Not all banks offer saving buckets and the number of buckets a bank might allow is also company specific so ask your bank if it offers this option. If not, you can easily find a bank that does. There usually are no minimum amounts required in each bucket and every bucket, being just a labeled envelope, earns the same amount of interest as the account it is under. Remember, when you have saving buckets, it is still only considered one account. Saving buckets are kind of a cool thing many people may not be aware of but they may help you better achieve your personal finance goals and needs. This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a BA in Economics with honors, 1979, and California Insurance License #0L34249. His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com.