Editor’s note: This is a transcript of the audio file.
If you’re saving for multiple financial goals, it’s a good idea to have multiple savings accounts. I’m Kristin Arnold with your Bankrate.com Personal Finance Minute.
Everyone needs an emergency savings fund that covers rent, food, utilities, debt payments and other regular expenses for six months.
But what about having money at the ready for periodic expenses like car-registration, vacations and home improvements? If these costs are on your list every year, but you don’t necessarily budget for them – you could find yourself whipping out your credit card or pulling the money from your emergency savings.
Now, to budget for these sporadic expenses, figure out the cost of each annual expense and divide it by 12 to figure out how much you should be saving every month to cover those bills.
Online banks can set you up with multiple accounts, letting you quickly move money from checking into savings … and back. Make sure the money you budget for each savings account is set on autopilot via direct deposit or arrange to have money drawn out automatically from your checking account into your savings account each month.
Each savings account should have its own clear goal. And don’t forget to review your goals each month to see if you’re on track. For Bankrate.com, I’m Kristin Arnold.