How a Sub-Account Can Help You Save

Everyone remembers their first piggy bank — pink, porcelain, and full of promise. It was cleverly designed with a slim coin slot on top, making it easy to drop in coins (or folded dollar bills), but almost impossible to extract. Beyond its cute features, there’s a simple, yet effective purpose behind the piggy bank: to encourage savings towards a goal and to make it difficult to spend money on a whim.

It’s far too easy to forget the lessons the piggy bank bestowed upon us as children. In fact, 40 percent of U.S. adults say they don’t have the money on hand to cover a $400 emergency, according to new data from the Federal Reserve Board. If you struggle with putting money aside, a sub-account can help you get started and stay on the right track.

What is a sub- account?

Put simply, a sub-account is a smaller space within your main account that you can create to save for specific purchases, goals, or life events. Whether you’re saving for a new apartment, a destination wedding, or building an emergency fund, sub-accounts make it easy to organize your finances. It all relates back to the famed mantra, “out of sight, out of mind.” Rather than lumping all of your earnings and expenses together, you can leave a certain amount of money aside to remain untouched.

Why they work

Throwing money mindlessly into a general savings account can be overwhelming and actually prevent you from making progress. Naming your sub-account, and deciding just how much money you’d like to see in it, will give you something concrete to work towards. Many lifestyle gurus have spoken about the power of naming your goals. You’re more likely to achieve your targets if you can make them specific and quantifiable. Sure, you have a rough idea of how much you’d like to put aside for your next vacation, but actually formalizing this can make a significant difference.

By creating a set of achievable goals, you’ll feel like you’re actually going somewhere, and create friction when you choose to go against those goals.

For example, saying “I want to go to Mexico next year” is an ambitious goal, but it’s not a smart one. Instead, open a sub-account dedicated to travel, decide how much you can afford to move into it each week or month, and then follow through with your commitment. Saving with a smart goal in mind will help put all of your other financial decisions in focus. As time passes, you’ll see the total in your sub-account grow, and you’ll be less tempted to dip into savings to make spontaneous purchases.

Getting started

Not all sub-accounts are created equally. Many banks don’t offer them at all, and some that do have hidden fees or exorbitant minimum balances. Choose a bank that allows you to make several sub-accounts under your main account and doesn’t penalize you for transferring money back and forth. This makes it easy for you to access your money in case you need to dip into it for emergencies.

At the end of the day, there are many ways you can go about saving more money. Find a tool that helps you visualize your financial affairs in a way that you like. By creating a set of achievable goals, you’ll feel like you’re actually going somewhere, and create friction when you choose to go against those goals.


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