1. A pesky thing that I have to keep a minimum balance in or my bank charges me a fee.
2. A place for money that I will gradually transfer into my checking account, even though I know I shouldn't spend it. But I feel a little bad every time I take $50 out so it's sill kind of saving?
3. A place for money that I don't really spend, but sometimes my bank give me twelve cents for having it.
As savvy amateur adults may notice, these are listed such that the first one is the farthest from what you're supposed to do, but the third on is getting close. Here's how we should be thinking about our savings accounts:
A place that I routinely add money to and only touch when I need it for emergencies or major purchases.
Ugh! Ew! Boring! I hate that Julianna, who do you think I am, MY PARENTS??? Savings accounts are actually great. And sexy! Watch the Parks and Recreation season seven premier and you'll see. If Chris Pratt and Aubrey Plaza have it, it's sexy, and I want it.
But how much an I supposed to save? That's a tough question. "They" say you should save 6 months of living expenses. I think this is an impossible goal for amateur adults. It takes me almost 6 months to make that much, and I've already spent it all on living! "They" also say you should spend only 20% of your income on housing, and 10% paying off student loans. I don't know who "they" are, but I think they're in cahoots with Old Economy Steve.
I suggest we frame our savings goals not in terms of a final amount, but how much we are adding to it, and how often. I shoot for at least $20 a week. I do it every week, rather than every month, because it's easier to part with $20 four times than $80 once. It's hard to imagine where you'll come up with that money, but if you just pick one luxury (Uber trips, craft beer, manicures, buying coffee every morning) and redirect that money to your savings, you may be surprised. Once you've gotten in the habit and worked saving into your budget it'll be easy, I promise.
So when can I spend this money?
Firstly, and obviously, emergencies. You already know what emergencies are. Second, not-quite-an-emergency unexpected expenses that you can't afford to pay with your "regular" money. You got a parking ticket, your phone breaks, you lose your wallet, whatever. Your savings account SAVES you (ahahaha) from having to ask someone to give or loan you some money, and allows you the freedom to be independent even when things come up. You can also use it for major purchases (this is not things that you really want that are expensive. Those don't count.) I recently bought a car, and I used much of my savings on the down payment and taxes. If you move and need to come up with first and last months rent, plus a security deposit and likely a realtors fee that's a job for your savings account.
Some banks will let you have multiple accounts. I went into my bank and just asked for more, so now I have three separate savings accounts, one for emergencies and not-quite-emergencies, one for when I need to save up for a big purchase, and one where I stash money so I can buy car insurance in a big six month chunk instead of month to month. You don't have to have triple the savings accounts if that sounds insane to you, one is enough for now.
I suggest we frame our savings goals not in terms of a final amount, but how much we are adding to it, and how often. I shoot for at least $20 a week. I do it every week, rather than every month, because it's easier to part with $20 four times than $80 once. It's hard to imagine where you'll come up with that money, but if you just pick one luxury (Uber trips, craft beer, manicures, buying coffee every morning) and redirect that money to your savings, you may be surprised. Once you've gotten in the habit and worked saving into your budget it'll be easy, I promise.
So when can I spend this money?
Firstly, and obviously, emergencies. You already know what emergencies are. Second, not-quite-an-emergency unexpected expenses that you can't afford to pay with your "regular" money. You got a parking ticket, your phone breaks, you lose your wallet, whatever. Your savings account SAVES you (ahahaha) from having to ask someone to give or loan you some money, and allows you the freedom to be independent even when things come up. You can also use it for major purchases (this is not things that you really want that are expensive. Those don't count.) I recently bought a car, and I used much of my savings on the down payment and taxes. If you move and need to come up with first and last months rent, plus a security deposit and likely a realtors fee that's a job for your savings account.
Some banks will let you have multiple accounts. I went into my bank and just asked for more, so now I have three separate savings accounts, one for emergencies and not-quite-emergencies, one for when I need to save up for a big purchase, and one where I stash money so I can buy car insurance in a big six month chunk instead of month to month. You don't have to have triple the savings accounts if that sounds insane to you, one is enough for now.
I hope you know that you are not an amateur adult on this point. If I had my life to do over, having a savings account at age 22 would be on top of the list! You are a wise woman!
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