Confession: I Hide Money
Some people love to squirrel money away and enjoy watching their accounts grow.
I’ve never been one of those people.
Money available meant money to spend – at one point even credit available meant money to spend! While I’ve worked hard over the past few years to rewire those thoughts, I’m not quite at the point where savings sitting in an account is comfortable for me. I still have an impulse to either spend or, more recently, pay down debt.
Although debt reduction is a positive financial move, sending too much of your cash flow to creditors and leaving yourself without any emergency funds isn’t a stable way to operate. I think many of us tend to put emergencies on a credit card and gradually pay them off. My one concern with that method, other than the potential interest charges if you can’t come up with the funds by the payment due date, is navigating a situation where your pay is late. We can’t pay our rent with a credit card here, and I’m not about to take a cash advance to pay for housing. Cash advances are the most expensive types of credit card transactions, with fees, higher interest, and no grace period.
That’s why I hide money – from myself. If I didn’t set up my financial environment in a way that encouraged saving, I wouldn’t have an emergency fund to fall back on and I’d be at risk of incurring more, and higher interest, debt.
Some of the things that have helped me keep at least $1,000 in savings for over a year – while saving for retirement – are minimum balances, separate banks, online only accounts, and automated savings.
The standard advice is to find accounts with no fees and no minimum balances, if available. I found that the most successful way for me to save a $1,000 emergency fund was to deposit that money into a chequing account at my local credit union that had a $1,000 minimum balance to keep the account free.
If I withdraw any money, I’ll have to either pay $7/month to keep the account open or head to the bank in person to close it and avoid the fees. Just the whisper of this hassle has been enough for me to leave that money alone and make it work with the funds in my main account.
I love simplicity as much as the next person, but sometimes I need to set up as many barriers as I can to protect me from myself. That’s why my $1,000 emergency fund is in a bank that I don’t use for my main chequing account. If I needed to access the cash I could, but it’s not an account I think about.
If possible, try to forget you even have an emergency fund! In a real emergency, you’ll remember. One caution about this – some banks charge fees for inactivity. I usually just transfer a small amount between accounts (make sure you aren’t charged any e-transfer fees! always with the fees..) or make a deposit once a year to keep things current. Often you can request that fees be waived, but if you’ve noticed I don’t really like talking to anyone in customer service unless it’s absolutely necessary.
Online Only Accounts
I have $25 in a high interest savings account with an online bank – I received that money as a sign up bonus and I’ve kept it there earning 2.30% interest which is about $0.05 per month – woo! The bank doesn’t have a physical location or a debit card, which makes it a decent choice for an emergency fund that I’d be hesitant to touch. I can easily transfer it to another account free of charge if I needed, but that extra step would make me pause and reconsider.
When I’m debt free, I plan to keep six months of expenses in this account. Why don’t I keep my $1,000 emergency fund there now, earning that 2.30% interest? I don’t trust myself yet. The friction of transferring money between accounts isn’t quite high enough to give me confidence that it will act as a deterrent. I’ve come a long way, but as someone with a history of addictive behaviour related to money and spending I want to be absolutely sure I can keep it there untouched unless there’s a legitimate emergency.
Automating your savings for immediately when you get paid (or before, in the case of workplace retirement savings) is a game changer! I have automatic contributions to retirement deducted from my pay before it even hits my account. Since I set this up when I first started working, I’ve never noticed the money leaving every month.
Automation is a great hedge against lifestyle inflation too! Whenever I get a raise, I increase the amount of my payments going to debt and when I’m debt free I’ll be doing this with savings instead. You don’t have to be responsible with all of your income increase either – even a 50/50 or 25/75 split (or whatever ratio you decide) can help you boost retirement while enjoying some of your extra earnings now. Who says that current you and future you have to be in conflict with each other over money?
Break In Case Of Emergency
I don’t personally do this, but I’ve seen the idea around and I love it. Take $1,000 in cash (or whatever amount your emergency fund is), place it into a picture frame, and write “break in case of emergency” on the front. Obviously you can just take the backing off and get at your money without the broken picture frame and subsequent visit to the hospital, but the visual cue is a way to remind yourself that this money is earmarked for emergencies only.
Anyone out there with a coffee can of money buried in their backyard? Don’t worry, your secret is safe with me!