Specialized saving accounts

Last winter, when one of our cats was diagnosed with a rare cancer, my husband and I took the cat to a renowned pet oncologist. Some of our friends, the pet lovers in our group, said they would have done the same thing to help a member of their family. Other friends, mostly people who don’t have pets, called us fools for considering the thousands of dollars in cancer treatments the oncologist might have recommended.

We ended up not having to make a treatment decision because the cancer was untreatable, and Basie cat passed away a few days later.

A couple weeks after that, my husband and I sat down and talked about setting up a medical saving account for our cat Charlie and any future pets we might adopt. We put $500 into savings and have been depositing $20 per month ($10 each) into the account since that time. Commercial pet insurance can be more expensive than what we’re doing, and, like traditional health insurance for people, it doesn’t cover all medical procedures and treatments. And, if we never need the insurance, we wouldn’t get the money we paid the pet insurance company back or with interest or be able to apply the premiums to another pet.

Simply, we created the specialized saving account for our pet because we never want to be in a position again where money has to be strongly considered along with treatment options.

After making this decision to create a medical saving account for our pet, we started to realize how this way of budgeting could help alleviate stress associated with other areas of our finances. We immediately created a specialized saving account for our automobile — $20 a month now goes into an account to cover service needs for our aging car. We also made a window replacement fund since we have a house mostly made of glass and a toddler with an amazingly strong throwing arm.

How to create a specialized saving account: When you acquire a new responsibility, you deposit an eighth or a quarter of your saving goal into a dedicated saving account as the account’s start-up fund (or a multi-use account that you keep records for what money in the account is for what purpose). Once the saving account is open and initially funded, you set up an automatic transfer through your bank to put $10 or $20 (or whatever amount you choose) into the new saving account from your checking account every month. This automatic deposit removes the temptation to spend the money on something else.

These specialized saving accounts reduce your stress, allow you to cover large expenses when they arise, and help you to live with an uncluttered budget (a budget where you spend less than you earn). Do you have specialized saving accounts? Would setting one up help you to prepare for an emergency expense? What reasons do you have to create a specialized saving account?

48 Comments for “Specialized saving accounts”

  1. posted by Amanda Smith on

    I don’t necessarily put things in a different account (although I did when saving for a house downpayment) but I’m the one who updates our family budget, and we do budget X a month towards certain things. I just update a multicolumn register (in google docs to share w/the husband) to reflect what money is designated to what purpose.

    I once was thinking about my salary and wondering how other people afforded things like huge CC payments and car loans on less money – then I realized that they probably weren’t setting aside $X towards home repairs, and $Y towards their pets and $Z towards the next car a month.

  2. posted by alwayslovely on

    I have 2 main accounts for education & long term savings.
    I put $ into these accounts by the same way as you: scheduled transfer from one bank to another.
    I use the education account to pay for books, seminars & related purchases.
    Having the automation helps in disclipne & consistency.
    A little a month goes a long way.

  3. posted by Fairway Gal on

    We have one savings account but track categories within that one account–vacation, car maintenance, dogs, home & garden, misc., etc. Rather than think of it as “savings”, we see it more as “non-monthly expenses.” Each payday a certain amount is automatically transferred from checking into the savings account; at home, in our record-keeping, we split that deposit among the categories we’ve set up. We have a ledger sheet that allows us to quickly add each deposit to each category every two weeks. We review categories and how much money we’re allotting to each of them about twice a year to see if adjustments need to be made. We can easily see how much money is in each “bucket.” We no longer think of our savings account as one big total; we think of it as several subtotals and know that should something unexpected happen, we have money set aside to meet that need.

  4. posted by Luke on

    I’ve been using sub-savings accounts at ING for this purpose for a few years now, and it’s worked out great. ING makes managing multiple savings accounts really easy, and you can open a new one instantly whenever you want. I originally got the idea from Ramit Sethi at iwillteachyoutoberich.com (he also has a book with the same name; that and the website are both great resources for young people trying to make sense of personal finance).

    The benefit of sub-savings accounts to me over tracking in a spreadsheet or something is it’s automatic. Just set up the account and a recurring transfer, and you don’t have to think about it again. If I’m considering a purchase, I can check how much money is in the budget from anywhere on my phone. No matter how you do it, though, budgeting for unexpected or irregular expenses can definitely help to unclutter your finances.

  5. posted by Karen on

    @Erin, Sorry about your cat. It’s never easy to lose a pet.

    This is a good idea, but just be sure to check with your bank about minimum required deposits.

  6. posted by mary b on

    I’m also a fan of the ING sub accounts. I do keep my one major emergency fund, and other savings accounts there, plus a checking account to auto pay those irregular bills like Insurance, newspaper sub, etc.
    Each account has its own auto-deposit.
    It is a great method not just for irregular expenses but also targeted savings like Christmas and Vacations.

  7. posted by Eric on

    Specialized savings accounts are brilliant for budgeting purposes. However, how are they not clutter? Just one more account (or spreadsheet) to keep track of…

  8. posted by Eddie S on

    We use this approach for electrical goods. We put a little money into a saving account each month rather than paying for overpriced warrantees when we buy anything. This meant that when our washing machine broke down a few months ago, we had the money to call someone out to look at it (and the bulk of the money for a new machine when he told us that it wasn’t worth trying to repair it!).

  9. posted by Another Deb on

    Very helpful advice! I just calculated that my historically healthy 20 year-old cat would be sitting on a $4800. nest egg right now! I am going to begin that sub-savings plan today; the automobile is 14 years old! The time is NOW!

    As Amanda noted, it is hard to pay for emergencies after the fact, due to interest rates on credit cards. I battled that for years and am now within a couple of months of breaking free of a credit card balance carryover each month.

  10. Profile photo of Erin Doland

    posted by Erin Doland on

    @Eric — Clutter is any distraction that keeps you from the things that matter most to you. So, in this case, what matters most to you is taking care of your pet or your family. The distraction is not having the money to care for what matters to you and the stress surrounding financial instability.

    Having multiple saving accounts would only be clutter if you don’t value your pet or your family and don’t wish to care and take financial responsibility for them.

  11. posted by Bethany on

    I have multiple savings accounts too. I like it because it allows me to easily keep track of all my different savings goals (ie save up X amount for emergencies, Y amount for taxes, Z amount for house expenses, etc.) And ING does make it incredibly easy to open an account on a whim.

  12. posted by Ruth Hansell on

    Erin, I’m so sorry about your cat. The financial worries about health care for pets are very burdensome. We lost a youngish border collie to bone cancer a couple years ago, and treatment was very, very expensive.
    I’m starting a couple specialized accounts today, one for pets and one for household/electronics replacements, (thanks, Eddie, for this idea!)

  13. posted by Corey on

    My wife and I had considered setting up multiple accounts, but instead researched financial management software and went with Mvelopes. That was nearly five years ago and we’re still going strong with it. Mvelopes let us set up virtual envelopes that our money ‘funds’ each month toward savings, our student loan payments, eating-out budget (I especially like this one), home maintenance, pet care, etc. It mimics the method that people used in days of old to set aside money in different envelopes for different purposes to prevent overspending.

  14. posted by Anita on

    @Erin — I’m sorry to hear about your cat.

    We had a health scare with both of our cats last year; thankfully they both got over their ailments with minimal medical intervention, but just the testing to figure out what they had put a dent in my savings.

    Since then my boyfriend has been talking about getting pet insurance, but I haven’t found any policy I’m sold on. I’d rather save that money and have it available when it’s needed. I don’t have a separate savings account for the cats, but I have budgeted the extra bit to go into my regular savings account every month, and so far so good.

  15. posted by Jennie on

    I’ve been doing this for several years. We carry the following specialized savings accounts: Mortgage (at least one mortgage payment), Home Repair, Vehicle Repair, Pet, and Electronic Replacement (essentially self-insuring our cell phones). These are held separately in online accounts, as opposed to our other short-term savings accounts for holidays and vacations which are held in our local bank.

    We actually have taken our uncluttered finances a step farther, and live off of last month’s income. This is the ultimate way to simplify your money management, plus it adds additional buffer funds for income emergencies such as lost wages.

  16. posted by Steve Hall on

    It’s never easy to lose a pet, however going to extraordinary measures to extend the life of an animal (especially an older animal, or if its quality of life is diminished) seems more cruel than letting nature take its course. Just my opinion.

  17. posted by Emily on

    I use ING’s accounts for my separate funds for car maintenance, auto insurance, and emergency fund. I also have started a SmartyPig account (because the interest rate was significantly better at the time) for my vacation fund.

    It’s nice to have these things automatically deducted from my account, because I know I’ll have the money to pay for those expenses. For example, whenever I have an oil change, I use money from the car maintenance fund. The money I’m putting in that account (~$50/month) will far exceed the cost of this routine maintenance, which allows me to save more so that I repair my car when something big breaks!

    It would also be a great way to budget for Christmas each year!

  18. posted by Laura on

    I just want to put another “plug” in for ING. I use their “sub” accounts too. The nice thing is you can name the account anything you want so it super clear as to what the money is for. I do seperate accounts for vacation, Christmas, car and home repairs. I still get irritated when I have to spend the money to fix my car, but I’m not frantic trying to scratch the money together.

  19. Profile photo of Erin Doland

    posted by Erin Doland on

    @Steve — My husband and I actually talked about the exact circumstances you’re describing. Since our cat wasn’t that old, we decided that if the treatments would have been able to rid him of the cancer and he’d be able to have a full quality of life afterward, we would do the treatments. We felt our actions would have been inhumane otherwise. However, we didn’t have the option of pursing that course of action.

    Going forward, we want to take money out of the equation completely. So, if a treatment for a pet costs thousands of dollars but the pet’s quality of life will be full after the procedure, we can move forward with the treatment. However, if the more humane action is to not carry out the treatment, we can follow that course and know our decision was based on the most humane act instead of not having enough cash.

  20. posted by WilliamB on

    I don’t think of these as “savings” accounts but as “life happens” accounts. Some things in life happen in predicable ways but with unpredictable timing. You know that at some point your car will need repairs or replacing, your fridge will eventually die, the house will need major maintenace. Since the need is inevitable we can get out in front of the unpredicable timing by saving the money now.

    Having “life happens” account(s) means our emergency account can be saved for actual emergencies: events that are both not predictable and not inevitable, such as getting hit by a car, getting laid off, or suffering catastrophic weather atypical for your area (a blizzard in Buffalo NY is life happens; a blizzard in Atlanta is emergency).

  21. posted by Ayn on

    I’m sorry about your cat. I lost one of mine to diabetes a year ago on Halloween & still miss him.

    We have a regular savings account, a state-run education fund for each of our children, Christmas fund, and a vacation account. All of these accounts have automatic deposits, and we do not carry any credit card debt. We don’t take a vacation/holiday unless we have enough money in our fund. We put $200 per month in there, and usually go on a really nice vacation every other year.

  22. posted by Margaret on

    I think Eric’s point about the accounts being more clutter might be that you could just have ONE account for emergency/irregular expenses, and say put $500 into it every month and use it as needed as opposed to keeping track that $50 was for this and $25 for that and $100 for the other thing, etc. If you are tracking several accounts but something comes along that is more expensive than what you have saved for that particular thing, do you just not spend the money (if that’s an option), put the rest on your credit card or just raid the other accounts? If you are just going to raid the other accounts, then the seperate tracking is just extra work. If you are going to make your decision based on how much you have saved for that particular item, then it’s not.

  23. posted by Deb in Portland OR on

    @Erin, I’m an enormous animal lover. We understand that pets are important members of the family. So sorry about your kitty.

    I too use ING for sub accounts. I have two large geriatric dogs, so I established the Vet savings account and contribute $35 a month. I recently had a Vet bill of $450, but thanks to the Vet savings account, I had more than enough money to cover it.

    I also have sub savings accounts for my garden hobby, for automobile replacement in the future, and then just a general emergency/sink fund. For me, ING is the simplest way to automate these savings and doesn’t require any spreadsheet or effort. So easy to transfer the money to your checking acct when you need it with ING.

  24. posted by Luke on

    Hi there,

    did you ever hear about YNAB (www.ynab.com)? Guess not, because that provides exactly what your talking about.
    It´s the budget-software of my choice, cause with it you don´t need the seperate saving accounts, you just budget for it and keep the money in your one account.

    Hope that helps
    Cheers
    Luke

  25. posted by KateNonymous on

    My mother did this–we didn’t have pets, but she loved to travel. She always had a separate savings account for trips. When she saved up enough, we could take one. I don’t know what her savings process was–if it was a regular thing, or if the occasional part-time work she did was the source. But I know that she wanted to be able to take us places, and she used a separate account to make sure that she could achieve that goal.

  26. posted by LDH on

    I use ING (because I love having as many accounts as I want) to save for car insurance, tuition, and clothes and personal grooming. I tend to go on a spree and get all my clothes at once (since I hate shopping), so it’s nice having a larger amount set aside just for this.

    I had never considered on for vet care, but considering I have two cats that are 4 and 10, it’s an excellent idea I will be implementing now for their upcoming dental cleanings and any future care.

    Ramit Sethi is a big pusher of automated savings, and he has showed his ING account titles, one of which is called something like “stupid stuff” which he uses to cover, well, stupid stuff, like parking tickets, etc.

  27. posted by LDH on

    Forgot to mention my favorite use…I started an ING sub-account for charity. I put a certain amount in with every paycheck, and then when I get an email or request from a friend, I can give a more substantial amount rather than just $30. I can give the larger gift without worry because it’s already there, and I know it’s coming out of an amount that I’ve already decided I want to use for charitable purposes.

  28. posted by MJK on

    I’m showing my support for the ING “sub” accounts! I’ve been with ING for just over 2 years and I’ve always had multiple accounts with them. It is so easy to see what money yo do have, and make changes to your contributions to each account. I have peace of mind knowing that if I need to repair my car, I have the money there (which I had to do 2 months ago!) or if I want to go on a vacation, I can fingure out how much that is going to cost me, and when I want to go and how much I need to save each month to reach that goal.

    To me it is a very uncluttered way of dealing with those things that we all save for in life.

  29. posted by Samantha on

    We do this for Christmas. From about August onwards we put aside a small regular amount from each fortnights pay into a separate savings account. We start early because I have to get presents together to post overseas. We would start in January if we were organized enough but the savings from the first 6 months of the year is for a summer vacation.

  30. posted by Josie on

    If you are putting money into different savings accounts, then you are doing what behavioral economists call “mental accounting”. It’s not usually a good thing for building long-term wealth.

    You can read:
    Why Smart People Make Big Money Mistakes and How to Correct Them

    http://www.amazon.com/exec/obi.....tterer-20/

  31. posted by Pammyfay on

    Currently, I have 2 savings accounts, one my “regular” pot and the other, my credit-union account, for funding a car purchase when my current one dies.

    Thank you to the posters who offered website suggestions like ING and similar places.

    I think that perhaps having the separate accounts is a lot better than “thinking” that your main savings account is compartmentalized, because with the latter, you can always fool yourself that you’re shifting funds for “just one thing” and then forget to reconcile that down the line.

  32. posted by Claudine on

    More support for ING subaccounts. I’ve saved with them for 4+ years with 15 subaccounts that pretty much cover all the financial issues in my life. Honestly, there are very few things that are a true ‘surprise’ and I’ve yet to run into anything that was not covered by one of my subaccounts.

    On payday, 85% of my paycheck is automatically wisked away into all the accounts, leaving me with an allowance in checking for monthly day-to-day expenses. My Appliances, Vehicle, Home Maintanence, Pets, Taxes, Insurance, Travel…. are all funded and ready for the inevitables. I especially like my ‘Daughters’ subaccount. Whenever I go visit, I dip into that for gas/dinner/entertainment/shopping – whatever enhances my time with them and zero stress about overspending.

    This absolutely fits into a clutter-free life as I rarely think about budgets or money. Granted, it took some time to set up a good system which matched my lifestyle and priorities but it is all on automatic now.

  33. posted by KAREN on

    I was advised by my car mechanic, after purchasing my very first car, to continue to save the regular car payments into a separate account for future car purchases and car repair and insurance. I pay $250/month into this account and have never regretted it. I am on my third car – paid mostly cash for it. I am a big believer in separate account for simplicity sake. My sub accounts are: Christmas club, Vacation, Car, House insurance/taxes (my mortgage is paid, and emergency fund. love your website

  34. posted by Rachel on

    Specialized savings accounts seem like a good idea on the surface, but how does that really help you save? Whether the money you saved is in a special account or just lumped in with other savings in a regular savings account, it can still be saved or spent. It’s not as if the money is untouchable should you decide to want to spend it on something frivolous rather than what it was intended for (pet bills, house down payment, etc.). Is this what Josie is talking about with “mental accounting”?

  35. posted by Gay B on

    @Erin

    “Having multiple saving accounts would only be clutter if you don’t value your pet or your family and don’t wish to care and take financial responsibility for them.”

    I have to say that I completely disagree with this and I’m a bit offended. Multiple saving accounts would drive me absolutley insane. I put a large amount into one saving account every month and use that account for all of my emergencies and needs. Vet bills are included in the emergency account.

    Saying the multiple accounts is only clutter if you don’t value your pet and accept responsibility for that pet is ridiculous.

  36. posted by Lynette on

    Hi! Big fan of the site. So sorry for your loss, Erin.

    I’d just like to share my experience with a serious pet illness and pet insurance, in case it’s helpful to anyone here. I had pet insurance for my cats for several years, as well as savings set aside for their veterinary care, when one of my darling cats became terribly ill 2 years ago. She had a hospitalization of several days and more than 30 outpatient vet visits in one year. It looked grim at one point, but there was always hope of a full recovery so we fought. Due to excellent care from the staffs of 3 animal hospitals, and some luck, she is alive and healthy today. The expense was horrific – about $10,000. But very well worth it, as she is fully recovered and happily dozing beside me on the couch now. She’s expected to have many more good years.

    Even a substantial savings alone wouldn’t have been enough in this situation. And it was truly a freak occurrence – a healthy animal was suddenly stricken with a life-threatening disease, and then a host of complications that dragged on for over a year. Without pet insurance, it would have been so much worse. The insurance paid about $4000 of the fees, and was a comfort when I wasn’t sure where this would all end – would it take another $1000 to get her well? $5000? Whatever it was, I would have done it, but I don’t know how. So it’s just something to consider. Especially for young pets, insurance is often inexpensive and could really make a difference.

    A savings account is a wonderful idea, just consider pet insurance on top of it. But hopefully you’ll never be in that situation…wishing you all healthy pets!

  37. Profile photo of Erin Doland

    posted by Erin Doland on

    @Gay B — You’re reading more into my comment than what was written. What I’m explaining is that taking responsibility for the things that matter to you isn’t clutter. Sure, keeping spreadsheets can be annoying, but annoying isn’t clutter when it’s for the purpose of carrying for what is important to you.

    The way you handle your account is fine. You’re taking responsibility for what matters to you most by saving money to care for those things. There is no need to be offended by what I wrote.

  38. Profile photo of Erin Doland

    posted by Erin Doland on

    @Rachel — I noted in the post that you can do one account:

    “(or a multi-use account that you keep records for what money in the account is for what purpose)”

    Small separate accounts aren’t even possible at some banks. A lump account is all a lot of people can do.

  39. posted by Rayna on

    We, too, have a couple of these. We have one for our pets (our vet discouraged pet insurance and said this was a better solution.)

    I also had one for a hobby but when I stopped doing the hobby, I converted it to our vacation account. When we went to Europe, this kept our budget under control and we didn’t overspend!

  40. posted by JL on

    Erin,

    Perhaps you didn’t intend to sound hostile and snarky, but you might want to reread the way this sounds, rather than what you meant to say: “Having multiple saving accounts would only be clutter if you don’t value your pet or your family and don’t wish to care and take financial responsibility for them.”

    How is it helpful to be inflammatory? Why not say, “This is the way I organize this so that I don’t have the clutter of financial anxiety, but other people may indeed have a different way of managing this that better suits them.”

    How much better is it to use “I statements” — focus on your own experience — rather than subtly implying that if someone else don’t have multiple accounts, then maybe you don’t value your pets or your family?

    Whatever you intended to say, it didn’t come out the way you meant.

  41. Profile photo of Erin Doland

    posted by Erin Doland on

    @JL — If someone doesn’t have a pet or doesn’t value the one they have, that person has no need to set aside money for that animal’s care and creating a savings account would be clutter to that person. If someone is single and doesn’t have a family to support or is thinking about bailing on his family, then keeping a savings account to support the emergency needs of a family would also be clutter to that person. I fail to see how you’re offended by this idea. I’m not saying the person has to value these things, I’m just explaining that if he/she doesn’t value them then an account would be clutter. You’re making the assumption that I care about someone else’s choices, which I do not.

    I will voice my opinion, however, and add that I do believe people need to respect and take responsibility for the things that matter most to them. It’s pretty much the backbone of being an unclutterer. You clear the distractions so you can focus on what matters most to you. I don’t care what people value and have on their list of what matters most — but I do believe that taking responsibility for those things is what it means to be an unclutterer. And, there are thousands of ways someone can care, respect, and takes responsibility for what matters most to them. Providing financially for those things is just one of many, many ways possible, and may not be necessary. For example, if someone’s spirituality is important to her, taking the time to pray every day would be one way that person cares, respects, and takes responsibility for what matters most. Setting aside a specialized saving account for one’s spirituality might be wholly unnecessary because the person does not value a financial commitment to that priority.

  42. posted by Cynthia Friedlob, The Thoughtful Consumer on

    Your suggestion is similar to the philosophy behind the Christmas Club bank account that was popular many years ago. A small deposit to open and regular weekly deposits throughout the year guaranteed enough cash to cover your holiday shopping. I like the idea of separate accounts devoted to specific goals because it makes it easy to track your progress; separate accounts for emergencies like the one you’ve described would provide peace of mind. Some people might be comfortable using a computer program and one account, but I think there could be a greater temptation to cheat — I know there would be for me. Talk about mental accounting!

  43. posted by Ms. Brooklyn on

    I’m sorry you lost your kitty cat.

  44. posted by Keira on

    I am so sorry to hear about Basie. I just lost my Gordon last month to kidney failure, and I miss him every day. Losing a pet really does make you want to take every possible precaution with the remaining pets. After Gordon died, I took my other cat, Morgana, in the very next day for a full physical. She’s just fine now, but when something does happen, we will take the very best care of her we can.

    Some of your friends may not understand why you’d spend thousands on cancer treatment for a cat, but believe me, I do. A pet is a best friend. I’d have given anything to have been able to save Gordon

  45. posted by barbG on

    So sorry to hear of the loss of your beloved cat.
    You certainly are a loving pet owner. Setting up a
    separate account is a good idea.
    BarbaraG

  46. posted by Maggie on

    I am sorry about your cat. I care for mine by treating “my” savings as “his” savings. If I have money that I would use to pay my own doctor bills, I can use that money to pay his vet bills. I have it all in one saving account though.

    If you have multiple savings accounts, don’t you take a hit on not earning as much interest as if you had it all in one big lump?

  47. posted by Mr. Banana on

    Brilliant idea! Creating a specialized savings account is not only flexible for any other areas of your life, but also enforces a budget and careful spending habits if used for curbing extra expenditure on entertainment and other unnecessary purchases.

    Sorry to hear about your cat. As someone who adopted a cat just recently and realized the joys of caring for a pet, I can say that only pet owners can understand the affection (and expenses) given towards the welfare of a companion animal.

  48. posted by Paul on

    Specialised savings accounts are a good idea, but I would still consider taking out pet insurance if possible. Our Golden Retriever, Teg, suddenly went lame at about 10 months old which turned out to be cruciate ligament failure in both stifle joints. She ended up having TTA surgery on both hind legs, at a total cost including investigations, surgery, aftercare and rehab of something like £8000. There’s no way we could have saved that much before the problem occurred, but thankfully we had her insured from puppyhood and so the whole thing was taken care of apart from the policy excess – around 10%. It wouldn’t have made a difference to the outcome – we would have had the surgery done anyway and found a way to deal with the cost – but as anyone who has been through it can testify, not having to worry about the money makes a big difference when you’re already dealing with a living creature who is hurting, and will likely continue to hurt for some time. Full recovery took more than 6 months; the first 3 months while the bones healed involved complete house arrest for our Golden girl, which was more than enough to worry about without money issues as well.

    I’d say the insurance premium was the best £300 we’ve ever spent.

    So much so that we’re just about to insure our new pup Talwyn – another Goldie – with the same company. And then cross our fingers really hard that she doesn’t have the same problems!

    Having said which, I think we’ll have to look at the specialised savings account idea for the cats, who aren’t insured mainly because the total premium involved would be insane. :)

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