I firmly believe this, and I teach this principle in all of my classes, regardless of their income level. The habit is more important than the monthly contribution or even, initially, the amount in the account.
I also believe that setting up automatic transfers into our savings account (either through our bank or credit union or, even better, through our employer’s direct deposit) is key to short- and long-term savings success.
That said, being easily able to access money in our savings accounts is just as likely (though I believe more so) to be a curse than it is to be a blessing.
Many of us, myself included, are “savings raiders.” If we see several hundred dollars available to us in our savings account, and if it’s easy to transfer that money back into our checking account, we’re much more likely to fall prey to impulse purchases or to justify spending on “can’t-pass-this-up” deals.
I’m not proposing any sort of institution-imposed delay to getting access to our saved funds, but for any savings raiders, I do suggest that we open a savings account at an institution that is NOT convenient. Here are the particulars to look for in the ideal savings account if you’re a savings raider:
- It should have LIMITED BRANCHES (ideally NOT near home or work or along our commute)
- It should have NO evening or Saturday hours
- Do NOT request an ATM card
- Find a financial institution that does NOT have a drive thru.
I have a local credit union that matches these criteria, and I use it to save for birthday and Christmas gifts for my wife (the only account I do NOT want to her see, but she does know it’s there). Otherwise, I’m too tempted to use that money to patch budget shortfalls or fund fun family activities. To fund the account, I have money automatically transferred there using bill pay from my main checking account in another financial institution.
We also use a separate online bank to save for a big family vacation coming up next year. I send off that deposit using bill pay (automatically), I’ve declined an ATM card, and I’ve even refused to connect that account to our main checking. That way, if I want to access money in that savings account, I must request that they cut a check and mail it to us. Those extra four or five days make it too inconvenient to raid the account for anything frivolous.
So let’s make it our mantra: “Inconvenient Savers Save Best.”