Let me share with you what happens when I go to the bank. The tellers just love me. I stand there with my money or my request to withdraw some money. Then they scroll down through account after account, until finally they ask me where I’m depositing the money.
Actually, I do most of my banking online now and I do take pity on the tellers and tell them about my various accounts. Most of them know me, anyway. But there are occasions when a new person is there and on these occasions, confusion ensues.
Why am I so confusing? Well, I have a chequing account and about 10 savings accounts. I use these separate accounts to save money for particular purchases that are coming up. I have one for my insurance deductible, one for summer berries, one for home renovations, one for Christmas spending. Each of the accounts helps me save toward medium-term purchases. On the first and fifteenth of every month, automatic withdrawals move money from the primary account into the secondary accounts. I use online banking when I need to move money back into the primary account to pay for a large expense.
My parents told me about six months ago that they were following a pocket system for their finances. This involves saving money for medium-term goals in real or virtual envelopes, and this is essentially what I have been doing for years. I didn’t realize that there was a name for it. I just knew that when all of the money is in one account, I don’t know how much I need or how much I have to put towards those medium-term expenses. This way, I can chart my progress toward Christmas savings or full from a separate, dedicated account when I buy berries to freeze.
The down side to this system is that the money is all in one place. It is tempting to plunder your medium-term savings to pay for short term spending, and that takes self control. Bank fees help with that. I choose an account that discourages me from moving money out but does not charge for deposits, and then I have more of an incentive to save.
Have you tried pockets? How do they work for you?
Image courtesy of juuchimmei at stock exchange.