Savings funds

[drcolleen]

To follow up the "how much cash do you carry" poll I have a question about savings being earmarked for things like cars, vacations and other big expenses you expect at some future date.  I hear people talking about budgeting these "savings" so that they have cash on hand, is that what most do?  If so where do you keep that money and is it a separate account?  I'll be honest and say I have never really saved specifically for such things and at this point I keep my emergency $50k savings account and add to it monthly if my every day checking/savings accounts exceed $20k on the 15th of each month.   I figure most things/activities/repairs won't cost more than $20k but some do, for example we bought a new truck for my husband this past year and so we just paid cash from the checking/savings pot + the extra from the emergency fund then let everything rebuild.   Am I missing something that would be helpful to me?

thanks in advance!

[Hatton]

I am close to retirement so I am starting to keep more cash equivalents.  I keep about 30 k in a local bank for my practice working capital.  This could be used in an emergency. I only keep 1-2k for day to day expenses.  I keep 100k split between a money market and short term bond fund at vanguard.  Mentally I know the next comes from the mm fund but I don't really have separate accounts for these expenses.

[jfoxcpacfp]

drcolleen wrote:

To follow up the “how much cash do you carry” poll I have a question about savings being earmarked for things like cars, vacations and other big expenses you expect at some future date.  I hear people talking about budgeting these “savings” so that they have cash on hand, is that what most do?  If so where do you keep that money and is it a separate account?  I’ll be honest and say I have never really saved specifically for such things and at this point I keep my emergency $50k savings account and add to it monthly if my every day checking/savings accounts exceed $20k on the 15th of each month.   I figure most things/activities/repairs won’t cost more than $20k but some do, for example we bought a new truck for my husband this past year and so we just paid cash from the checking/savings pot + the extra from the emergency fund then let everything rebuild.   Am I missing something that would be helpful to me?

thanks in advance!

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Any funds you will require in the next 5 years (as determined by your financial plan) should be kept liquid. Earnings are trumped by safety and liquidity. Known needs (such as that truck of your husband's) should be used to purchase a CD or high-quality corporate bond (my preference) timed to mature at date of need. You will get a little more income but protect your principle. Unknown needs (emergency fund, for example) should be kept in a money market account. I care not whether you earn any income on it, just that the money is there when you need it so that you don't have to liquidate an investment when the market is down, which is a very real risk otherwise. What you are missing is a real financial plan. If you want to DIY, start with Carl Richards' The One Page Financial Plan.

I would never recommend using a bond fund for short-term liquidity.

[conniebird]

I do specifically save for these kinds of things that relatively short term. I keep the money in cash at the bank. I use YNAB (budgeting software) and just use a new category to earmark a certain amount per month till I reach the goal. Makes it super easy for me and don't need to really think about it. I have a vacation fund and holiday gifts fund for example.

[conniebird]

My emergency fund is mainly for loss of income and unexpected larger expenses. But I have cash set aside for car repairs/new car purchase and house maintenance - since these things WILL come up, just a matter of when. We just talked about having a 10k "property fund" so we will be saving up for that as we want to update some things. It's a work in progress - trying to send a boatload towards loans now.

[DarrVao777]

drcolleen wrote:

To follow up the “how much cash do you carry” poll I have a question about savings being earmarked for things like cars, vacations and other big expenses you expect at some future date.  I hear people talking about budgeting these “savings” so that they have cash on hand, is that what most do?  If so where do you keep that money and is it a separate account?  I’ll be honest and say I have never really saved specifically for such things and at this point I keep my emergency $50k savings account and add to it monthly if my every day checking/savings accounts exceed $20k on the 15th of each month.   I figure most things/activities/repairs won’t cost more than $20k but some do, for example we bought a new truck for my husband this past year and so we just paid cash from the checking/savings pot + the extra from the emergency fund then let everything rebuild.   Am I missing something that would be helpful to me?

thanks in advance!

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That is basically what we do as well. We have a savings account that is our emergency fund. We have a checking account where all spending comes out of.

With each monthly paycheck, we subtract a percentage for our retirement taxable account. We use the remainder of the money to ensure both checkings and savings are at the levels we desire. On good months where there is extra left over, we stash away the extra funds into another more aggressively invested taxable account.

I know some have their savings/checkings earmarked into different items like cars/vacations/other big expenses but they fortunately come up so infrequently for us that we don't bother.

 

[conniebird]

We like to take a few vacations per year. That's our splurge - food and travel. So it's something we definitely save up so we can take them without using other funds. Fortunately our mortgage is very cheap for where we live which is usually a huge expense for other folks in my HCOL.

[wideopenspaces]

We have an emergency fund, a checking account, and a short term savings account. We don't touch the EF. Vacations, gifts, house projects/upgrades, a new car (when the times comes), and random expenses, will all come out of the short term savings account. We put in 2k/month, and that works well for us.

[scbunker]

drcolleen wrote:

To follow up the “how much cash do you carry” poll

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Are you referring to the "how much do you keep in the bank" poll? I can't find one for "how much cash do you carry." Though I like the question "How much cash do you carry in your wallet."  I'd like to see that poll.

[DarrVao777]

NotADoc wrote:

drcolleen wrote:

To follow up the “how much cash do you carry” poll 

Click to expand…

Are you referring to the “how much do you keep in the bank” poll? I can’t find one for “how much cash do you carry.” Though I like the question “How much cash do you carry in your wallet.”  I’d like to see that poll.

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In my wallet, $20 for the local pizza place that only takes cash but otherwise, everything else goes on a credit card that can be easily frozen in case my wallet gets stolen (sadly, something that happens quite frequently at work)

[wideopenspaces]

That made me laugh. I'm the worst at having cash on hand. I rarely have any in my wallet and if I do, it's $20 or less.

[dmlr06]

We have several months of living expenses saved up.  I am the sole breadwinner currently with spouse staying home.  We have another savings account for vacations and have an automatic transfer monthly to save up for that.  We're not strict budgeters but live below our means overall; so our vacation spending sometimes exceeds out savings.  We have another savings account (with automatic monthly transfers) for annual bills - those things that we pay just once a year like car insurance, life insurance, flood insurance - but that could take a decent bite out of our money for the month that they are due.  We still have loans on our vehicles (bought used); I'll probably open another savings account for that once they're paid off.  We have a couple of other savings accounts (all online - just switched to Ally) for other things.   Lastly, I just put $25k from my contingency/emergency fund into a physician checking account at Metropolitan Bank that pays 2% interest for first $25k.