A reader recently asked me a question about how I recommend people handle their short-term savings goals. After crafting my response, I decided it was actually worth elaborating a little bit more about the short-term savings system I’ve used for much of my life. By using this system, I’ve been able to buy the stuff I want without really noticing any impact to my wallet, and importantly, also NOT buy stuff by giving myself time before any big purchase.
So, what’s my system for handling short-term savings? The key is to use sub-savings accounts. These are separate savings accounts that I open at one bank and that are each earmarked for a specific purpose and funded over many weeks and months. Some things you know you’ll buy each year (i.e. Christmas presents). Other things are more sporadic or unpredictable, but will likely come up at some point (i.e. home or car repairs). The important thing is that once you fully fund each account, you can pay for whatever it is you need to pay for without any guilt.
Setting up sub-savings accounts is pretty simple. To do this, open up an account at a bank that lets you create multiple sub-savings accounts. Technically, these sub-savings accounts are all treated as different savings accounts, but you can see them all in one dashboard whenever you log into your bank account’s website or app (in other words, you won’t have to log into multiple accounts). A good bank will let you open up each sub-savings account really fast – you should be up and running for each account in minutes.
Once your sub-savings accounts are open, you’ll want to designate each one for a specific goal, and only use the money for that goal. Ideally, whatever bank you use will also allow you to name each specific sub-savings account. This is really important because it helps you understand what the money is for and makes you less likely to use it for other purposes. For example, I have the following sub-savings accounts set up for my short-term savings goals:
- 2019 Side Hustle Income
- 2018 Side Hustle Income
- Stupid Mistakes Fund
- Dog Fund
- Christmas Money
- Bank Account Bonuses
From there, figure out how much you need for each specific goal and start saving for it in small chunks over time. If you know that each year you spend $500 on Christmas gifts, then start saving about $41 each month for 12 months. By the time Christmas rolls around each year, you’ll have $500 ready to go. And you won’t even have noticed that you saved it.
Different Types of Short-Term Savings Goals
The idea of short-term savings is pretty straightforward, but it gets slightly more complex in my system. That’s because I think there are two types of short-term savings goals.
First, there are regular short term savings goals. These are things that you know you’re saving up for and are planning to buy pretty far in advance – an engagement ring, a vacation, Christmas, and other similar things. Because you are planning for these in advance, you can set them up at home on your computer.
The second type of short term savings goals are the ones that just randomly come up – I creatively call these “random” short term savings. For example, you might be at the mall and see something that you want to buy that you didn’t even know existed before you saw it. But instead of buying it right away, you decide to avoid going into debt and instead save up for it before you buy it.
That’s what I did a year ago when I wanted to buy a new suit that I saw at the mall. Instead of spending money unplanned, I instead decided to give myself some time to save up for it. Doing this also comes with the added benefit of testing myself to see if I really want to buy something – it basically forces me to have a cooling off period before I buy anything expensive. It turns out I didn’t really want that suit, and now, 1 year later, I have some extra cash that I saved without even noticing it.
The thing about random short-term savings is that you don’t really plan for it. Instead, you need to be able to set up these savings goals on your phone really fast, otherwise, you’ll forget to do it. Thus, the differences between these two types of short-term savings lead me to use two slightly different systems.
Basically, I use normal bank accounts with sub-savings accounts for regular short-term savings goals. And I use fintech apps for my “random” short-term savings goals.
The Best Savings Accounts for Regular Short-Term Savings Goals
As explained, regular short-term savings goals are the goals that I’m able to plan for well in advance. Because of this, I stick to normal, online banks when I’m saving for regular, short-term savings goals. Here are a few that I recommend.
Capital One 360. I personally use Capital One 360 for my regular short-term savings goals, primarily because it was the savings account I first opened back when I was a teenager. At the time, Capital One 360 was still ING Direct, and it was pretty much the only bank account that was totally online and allowed you to do sub-savings accounts. When Capital One bought ING a few years ago, all of my accounts became Capital One 360 accounts. They still work totally fine, so I’ve just kept using them, although I haven’t been happy with some of their recent website changes. Still, it works, so I just keep using it.
Ally. Ally is another bank that I recommend, and honestly, I think it’s probably the best overall bank in the United States for pretty much everything. They also let you set up different sub-savings accounts and give them different names. I keep the bulk of my emergency fund in Ally (in a savings account that I’ve labeled “emergency fund”), but I haven’t used Ally for short-term savings. My wife uses Ally exclusively for both her checking account and all of her savings accounts.
Discover. Discover is another bank that I initially opened to get a bank account bonus, but then kept using because I think it’s a good bank. They also let you open up multiple savings accounts and name each one with a nickname. At the moment, I use Discover for all of my Airbnb income, but I could see myself using it for short-term savings goals if I ever make the switch.
There are a lot more savings accounts you could use, and these are just three that I personally use and think are good. Importantly, all of these accounts are totally free and have no minimum balance requirement.
To sum things up, whichever account you use for short-term savings goals, remember three things:
- Pick a savings account that lets you create multiple sub-savings accounts easily.
- You should be able to give each sub-savings account a particular nickname so that you can easily see what you’re saving for.
- Whatever savings account you use for short-term savings goals should be free and have no minimum balance requirement.
How To Handle Random Short-Term Savings Goals
Random short-term savings goals are for the things that you randomly think about when you’re out and about. You need to be able to use your phone to set these goals up because you won’t remember to set up a new savings goal when you’re back at your computer. This is why I recommend using fintech savings apps to handle these types of savings goals.
Unfortunately, how to save for random short-term savings goals is a little bit more difficult to figure out in the current fintech landscape. For a long time, I was using Qapital, as they worked perfectly for this. You could basically open the app, set up a new savings goal in seconds, then automate how much you needed to save. This worked out really well since I could see something I wanted and then set up my savings goal on the spot.
However, Qapital recently went to a paid subscription model, which means it’s pretty much useless for most people now. If you signed up for it before the paid subscription model was put into place, then you’re grandfathered into a free membership, so keep using Qapital for your random short-term savings goals if you still have the free version of it. For everyone else, you’ll need to use something different.
I’m still on the lookout for new apps to replace Qapital. I’ve been using Simple as my primary checking account for a while now, and they have a “goals” feature that has the potential to do what Qapital used to do for me. This might be a good option for anyone that uses Simple as their primary checking account.
Another app that seems to have the potential to replace what Qapital did for me is an app called Rize. It’s an app that’s similar to Qapital, but I never used it much since Qapital was already working for me. Rize looks like it’s relaunching to a new type of app though, so I’m waiting to see what they do (as of now, I don’t think they’re accepting new signups).
So, for now, I’m probably going to just keep using Qapital for my random short-term savings, since I still have the free version of it as an original member. I’ll be testing out Simple some more as well to see if the “goals” feature is what I’m looking for. I’ll be sure to update this post as I figure things out. Remember, fintech changes fast, so you always have to be prepared to pivot.
Automate Your Short-Term Savings
With all that said, the thing you have to do with short-term savings is to automate everything. Whatever bank account you use should allow you to automate your savings so that you save a certain amount each week or month. Set things up once, then never think about it again.
You can use any system you want that works for you. At its core, this system works by earmarking my savings for specific things and automating my savings over a period of time. Then little by little, the money I’ve saved adds up. Because I’m saving small amounts at a time, I never notice the money leaving my checking account. You’ll be surprised at how much easier it gets to buy things when you start planning in advance and saving for it over time.
More Recommended Ebike/Scooters
Check out these other ebikes/scooters I've had the chance to do a review for:
- GEN3 Outcross Bike – The GEN3 Outcross is a solid, affordable fat tire ebike that does a good job of doing what I need it to do. It works great for city riding, giving me a smooth ride in all conditions. It’s works really well as a winter ebike since the fat tires give it good traction over snow and ice. Check out my GEN3 Outcross Review.
- Himiway Escape Bike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Bike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($10) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with $100 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Moomoo (5 free stocks) – Moomoo is a free investing app currently offering 5 free stocks (usually worth around $75-$100) if you open an account using a referral link and deposit $2,000. Read my Moomoo referral bonus guide for more information.
- Webull (5 free stocks) – Webull also gives you 5 free stock valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free stocks using Webull.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- Upgrade ($100) – Upgrade is a free checking account that’s currently offering a $100 referral bonus if you open an account and complete three debit card transactions. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Importantly, this bonus says that it’s now scheduled to end on October 31, 2022. As long as you get your account opened before October 31st, you should be eligible. Here’s a post I wrote with more details: Upgrade $100 Referral Bonus – Step By Step Directions.
- SoFi Money ($350) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $300 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Fifth Third Bank ($250) – This offer is limited to customers in the following states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, West Virginia, and South Carolina. If you don’t live in one of those states, you won’t be able to open an account online but you can still open an account in-branch if you happen to be visiting a city that has a branch. This is a fairly easy bank bonus to earn, especially since there are plenty of data points showing what will trigger the direct deposit requirement. In addition, you can open the Fifth Third Momentum Checking bank account, which comes with no monthly fees or minimum balance requirements. Read my guide on this bonus here.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link.Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- OnJuno ($100) – OnJuno is a fintech/neobank that is currently offering a $100 referral bonus if you open an account using a referral link and complete a direct deposit of $250 or more. The account has no fees or minimum balance requirements. Even better, the bonus posts immediately after you meet the requirements. If you can meet the direct deposit requirements, OnJuno is an easy bank bonus that’s worth snagging. Check out my OnJuno referral bonus guide here.
- Varo ($50) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $50 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
- Fairwinds Credit Union ($100) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Spiral ($50) – Spiral is a fintech bank that's currently offering new customers a $50 signup bonus after opening a free checking account with them. The Spiral referral bonus is especially good because it's a free checking account and doesn't require a direct deposit to earn the bonus. Here is my step-by-step guide on how to earn your Spiral Bank bonus.
- One Finance ($50) – One Finance is a fintech bank that’s currently offering a $50 signup bonus if you open an account using a One Finance referral link and have a direct deposit of $250 or more. This is a completely free bank account with no minimum balance requirement, so if you can meet the requirements, it’s worth doing. Check out my One Finance referral bonus guide here.
- Albert ($150) – If you can manage to do a real direct deposit, Albert is an easy account you can use to earn a referral bonus. Here’s a review about Albert I wrote. And here’s a step-by-step guide on how to earn your Albert referral bonus.
- Netspend ($20 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $20 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $20 to start! Make sure to check out my in-depth guide on how to set up these accounts.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
- Upgrade Bank. Upgrade is a free checking account that’s currently offering a $100 referral bonus if you open an account and complete three debit card transactions. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Note that it’s now scheduled to end on October 31, 2022.
- Novo Bank. Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. It’s the business checking account I currently use for this blog.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
yes, kevin, to all of this. we’ve been using a similar system for more than 10 years. like your wife, i switched checking and savings to ally a few years ago and haven’t looked back. i’ve been beating the ally drum ever since for my readers and should mention that last year we even opened a 2% cash back ally credit card for gas and groceries. it came with a sweet $150 bonus.
the one thing i do differently is just use the savings as one account and do the math on paper each payday because i’m old and a relic. our categories are gift/travel/home repair, e-fund/roth$, home taxes, my overtime, and mrs. smidlap’s art$. this was less important a few years ago with 2 full time incomes but became more important when we went down to basically my income without feeling a lifestyle hit. we just went to new orleans last week and it cost about 3k but we didn’t worry much about spending on vacation as the money was already saved for the purpose.
That’s great – and glad to see your system works for you. I prefer separating things myself just because it helps me visualize my money better. Of course, do what works best for you!
I opened a simple account after reading one of your posts and find that it works really well for savings goals. All money is in one account but I use the goals function to earmark my funds for specific purposes.
That’s great to hear! I’ve been playing with the Goals function to see how it works. My only thing I don’t understand is whether that money is really treated separately, or whether it’s still accessible. I can’t quite tell, because I see there’s “protected goals” and then just regular goals.
Hey there!
Thanks for the thoughtful post.
I think it’s possible that creating all these sub-accounts (especially spread across multiple banks) could needlessly complicate your financial management system. While this may not be as much of an issue for financial “nerds” like you and me, I think there are alternatives that solve this problem better.
Have you heard of YNAB (You Need a Budget)? It essentially allows you to create infinite sub-accounts in your budget without having to set up any new bank accounts. Generally I try to avoid any type of recurring subscriptions to keep costs as low as possible as we sprint to FI and you do have to pay for YNAB, but in this case, I think the outlay is more than worth it.
I won’t go any further into it as this is already a lengthy comment, but there are also some free alternatives such as GoodBudget, although I haven’t used them because YNAB does such a great job. I was mainly just curious if you’d heard of or explored it. I think it does a great job of embedding certain aspects of FI philosophy into software.
Either way, keep up the great work; I thoroughly enjoy your content!
Cheers,
Wallet
Thanks for the comment Wallet. I know about YNAB, but haven’t personally used it myself. For sure, whatever works for you, definitely do it. I’ve always felt that YNAB is more of a budgeting app, and I’m admittedly not much of a budgeter (I basically don’t budget at all).
I was also thinking about YNAB as I read your post. I have been using it for a few years now and find it extremely helpful to save in different categories. They also offer free live classes to help you get started and maximize its’ potential and they put out regular newsletters and YouTube posts. It is well worth the subscription price.
Yeah, I know a lot of people use YNAB. Maybe I need to take a closer look at it. My issue is that I’ve never been a fan of budgeting. I like their 4 rules thing, but just don’t like doing all the budgeting stuff.
Hi! I always enjoy reading you…and wanted to bring up something I’ll have been doing. We have a small family…2 sons, one daughter in law, 2 grandbabies. We have found that the best gift to give them is cash. I save up that extra cash by watching Marie Kondo and her method of hoarding avoidence by eliminating extra things. I then sell them on Craigslist or Nextdoor. That money is kept in unique containers or purses or piggy banks for that special person year round. It never hurts our budget and I can contribute whatever extra coin or cash I have. That container is wrapped up as a gift and then they have money plus excitement of a gift. The amount is never the same amount …but the person can see exactly how often we were thinking of them. It makes giving fun. Kate
That’s awesome! And great to get rid of extra stuff you don’t use and turn that into cash. Very creative way to essentially save for gifts.
Thank you! This is great info. I certainly did not know that Qapital has started charging now either. I guess I am grandfathered in as well but will be on the lookout to see whether they start attempting to charge even the grandfathers! Thanks again. June
Glad it helped. Yeah, if you’re grandfathered in, Qapital is still good to use!
Kevin, I agree with online banks for short-term savings as, not only they are safe, they offer a higher interest rate than a typical, traditional savings account. Great article, overall!
Thanks Joel!
Hi Kevin!
Really useful information, thank you so much!
I just have a question, do the sub savings accounts get the interest rate separate also? Would that be an inconvenience for having sub savings accounts?
Sub savings accounts are basically just a different savings account. So all of them get their own interest rates. Really doesn’t impact anything.