Step 3: How Many Savings Accounts Do You Need?

corner-piggies This week, let's work together on 5 small steps that will enable you to worry less and feel more in control—so that it takes less effort to manage your finances this fall.

We all know the answer to the question, How many pairs of shoes does one woman need? (A: As many as she can wear!)

But how many savings accounts does it make sense to have, outside of retirement?

A: You need at least three active savings accounts.

  1. Curveball fund. Automatically transfer at least 5% of every paycheck, to cover random expenses (a lapse of reason at a yard sale, a broken toaster).
  2. Emergency fund. Ditto, but only tap this in a true do-or-die crisis. When they say, "Save three to six months' worth of living expenses," this is where it goes.
  3. YouNameIt fund(s). Set up at least one other account for a looming goal or project: a cushy reading chair for the bedroom, a holiday party (or getaway from the parties), adopting a child.

Where to stash your cash?
Liz Pulliam Weston has some great advice about shopping around; Ramit likes the convenience of ING, even if the rates aren't great. Pick whatever setup works for your saving style (the rate matters more when you're holding onto the money for a few years).

And, according to behavioral economics research, by giving each savings account a name you're less likely to "accidentally" spend that money on something else.

Set up a YouNameIt fund today, and tell us what it's for.