How to Save Money from Yourself

We all want to build up our savings account, but oftentimes it feels like there’s a leak in our savings bucket, and it’s constantly dripping away through our checking account and into the sand. Here is one way to enable you to reach your financial goals and stop that leak from dripping your savings away.

Have a Separate Bank for Savings

Most people have their checking and savings account at the same bank. This may seem convenient, but behaviorally it encourages you to drain your savings account whenever your checking starts running low.

Instead, set up your savings account with a different bank. I did this last year with an easy online bank called Ally. There were no fees and it only took me an hour or so to set up. And there are two powerful effects this had and continues to have on my spending.

1. It Takes 2–3 Days to Transfer Money from Savings to Checking

Most bank to bank transfers take 2–3 days to process. This is one of the keys that makes this strategy work. It goes like this:

I want to buy a portable phone charger so that I can play pokemon go from now till sunset. I check my checking account to make sure I have enough money and sure enough, it’s not quite there... Normally in this case I would just transfer the money I need from savings. “It’s right in front of me and it only takes five seconds to transfer so hey, why not?” I think.

But now with my savings at a different bank account, if I want to transfer it to checking it takes three days. Three whole days. That’s longer than it takes for my package from Amazon to get to my house…

In the end if it’s important enough that I really do need it, I end up being able to wait the few days. However, what ends up happening 90% of the time is that I’m too lazy to wait that long. So I just give up and decide not to spend the money.

And thus, rather than having to muscle out my willpower to save money, my decision to protect my money comes naturally, making it a much more sustainable way to save.

2. The Less You See Your Money the Less You Use It

The other advantage having a savings account in a separate bank gives is that it hides it from you. Although you probably check your checking account frequently, with separate banks for your savings you end up checking it far less.

I’ve had multiple times where I thought I only had some small sum, but when I eventually checked I had 2–3 times more in that account than I realized. This saves me from being tempted to use it simply because it’s out of sight and out of mind.

I’ve even used this principle to hide smaller savings within my checking account. (In my normal bank I can change my preferences to hide accounts in online banking) And I often completely forget I have that car repair fund hidden there till I actually need it, saving me from raiding it when I really don’t need to.

Stop the Leak

It may seem like a small change, but just as removing junk food from your home helps you eat better, making it more difficult to access that savings makes it much less likely to leak away. This enables you to actually build up that emergency savings, or house fund that you’ve been meaning to build up.

In the end it’s a small change that makes a big difference.

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