Savers tend to be divided into two groups.
The first put money away into just one savings account. They love watching that total balance grow. There’s nothing more inspirational than slowly getting richer.
The other group insists on splitting their savings up into sub accounts. One might have money for a new car. Another will be earmarked for a down payment on a house. And so on.
There are pros and cons for each group, but I tend to be a fan of having multiple savings accounts.
Most people aren’t motivated by watching their pile of money grow bigger. Money is something you spend, not hoard forever. If that cash isn’t attached to a goal, the motivation to save slowly goes away over time. If we connect saving to specific goals, then we create a very clear incentive to put money aside.
By attaching important items to saving, the act of saving becomes a way to get a new car, or a house, or a dream vacation. Saving will be associated as a positive thing, not a negative. Look at all the fun things saving can buy!
A saver will be reminded of these goals every time they log into their account. And if they can find a way to save faster, they’ll reach their goal that much quicker. That’s way more powerful than throwing money on one pile and deciding what to do with it later.
In personal finance, psychology matters. A small tweak to something as simple as a savings plan can really pay dividends down the line.
