November 03, 2006

Curious George: Earmarking Savings? Do monkeys know of any way to reserve or 'earmark' a portion of a savings or current/checking account for a particular purpose? Apart from setting up multiple accounts, of course.

I was just stung for a few annual payments like my car MOT, insurance and service. They didn't come as a surprise, because they're in the diary, but my bank account suffered. For example, I set up a pot called 'Car MOT & Service', and I pay a small amount in each month, so that when the time comes, the money is there. I guess it's like having multiple virtual piggy banks, with specific purpose for each one.

  • Check with your bank - it could be possible to create "mini accounts" alongside your main one. I have a current account with three associated savings accounts: one for me, one for mrs roryk, and one for our son. The additional cost for setting these up was zero; the money is available on demand; and each account bears a small amount of interest. For annual costs, I try to monthlyfy (menstruate?) as many as possible, having been stung very heavily with multiple end of year bills in the past.
  • roryk, that sounds ideal. One thing, though. I'm in the UK, and most of my bills are paid by monthly Direct Debit. Other bills are paid annually, and in fact cost less to pay annually (esp. car insurance). A big problem is that I work for a US company which pays me every 2 weeks, rather than every calendar month, and once in a while you get 'The Perfect Storm' when my mortgage, annual bills, and that month's bills all come out just before I get paid.
  • My credit union allows me to set up subledgers in my savings account. They can even set it up so you CAN'T touch the money until a certain date.
  • With a checking account, I write monthly checks for annual payments. For example, car insurance, 1,200 per year, I write a $100 check every month, stick these in an envelope and debit my account. When the bill comes I pull out the checks and mail them (I'm sure they wonder why they get ten checks for one invoice, but, heck, they don't send 'em back!). This works for quarterly payments as well, of course. Simple..
  • That sounds workable, HB, but how do you debit your account if you just put the cheque in an envelope? I may be missing something there. Another case of US/UK banking difference?
  • Can you talk to your bank and utilities, and see if you can adjust their due dates? If you can schedule them to be due after you get paid, it may make things easier. Or, if you can do this, stop the direct bank payments for bills, and have them charged to a credit card, which can be paid on a predictable monthly schedule. (Only do this if you can pay the card in full of course.) If you do the latter, you could set up one account that would pay the visa bill directly, and make payments to that account regularly from your chequing account.
  • For a while, I was writing all my checks in January, putting them in addressed, stamped envelopes in a monthly file, and putting them in the mail at the beginning of the month. I lost the file in May.
  • > When the bill comes I pull out the checks and mail them Is there a time limitation on checks? I mean, a time period during which they must be cashed.
  • I second asking for a change in the due dates. Most companies these days are willing and able to do that (mind you, my experience is in the US). I think Huron Bob's solution works only if you keep an accurate check register, and rely on that balance religiously, rather than the balance your bank gives you. If I'm understanding correctly, HB, you're saying you write the check, subtract it from the balance in your check register, but the money actually stays in your account. You go by the balance in your register, rather than any balance you see at the ATM, on bank statements, etc. Yes? I have to shamefully admit to not keeping a check register. Maybe it's because, working at a bank, I can look at my account in great detail every day.
  • Lara, you're right...the money stays in my account, but is debited from my register. And, yes, i used my balance, not what would show checking my account online, atm, etc. I've not had a problem with the dates on the checks, but you wouldn't actually have to date the check until you mailed it if that was an issue.. The system works for me, and i was terrible about these annual/quarterly bills before figuring this out...
  • Shoe box under bed?
  • A row of virtual shoeboxes, all acting as one under-mattress fund, accruing interest as one lump sum, being drip-fed from my current account each month, so when the annuals come round, the correct shoebox suddenly pops open and feeds the current account the correct amount, which is then direct debited. The shoeboxes have lights and buzzers and alarm clocks and calendars attached to them. That's what I want. That or a spreadsheet.