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Making a simple change to my monthly savings strategy is helping me tuck away thousands more than I ever did before

Taryn WilliamsTaryn Williams

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On average, Americans aren't saving much and — for the most part — we could all benefit from saving a little more. One common error is keeping all of your savings in one account with no distinctions — we are less motivated to save when we don't have clear and specific goals. When I realized that having one savings account was part of the reason that I wasn't tucking much away, I made the switch to "sinking funds" and watched my savings take off. 

Sinking funds are individual savings accounts that serve different purposes, like a down payment for a home, a vacation, or car-maintenance expenses. In order to keep them entirely separate, I have mine at different banks, but many people keep theirs at one bank, like Ally (which offers an "envelope system" of separating your account into different "buckets"). Both systems can work and it's a matter of finding what's right for you. 

For me, I keep separate emergency, retirement, and investment accounts and allocate the rest of my savings to various sinking funds. 


Here is a breakdown of the accounts I have and how much I send to them each month.

Travel: $200 - $300

Travel is my largest fund, since that's where I spend the most money. I allocate an average of $200 to $300 each month to this account, though it can vary a bit. I deposit more when I receive extra funds — like tax refunds and bonuses — and increase the amounts when I am getting closer to a trip. Usually I save $3,000 to $4,000 at a time in this account and use that with credit card redemptions (miles, points, and hotel stays) to fund my travel. 

Pet: $150

Shortly after I moved to Alaska, my students brought me a puppy they found who has been with me since. Each month, I send about $150 to my pet account to help cover unexpected costs, such as vet visits (and expected ones, like the $200 plane ticket when I fly her in and out of the Alaska Bush, where we live). Currently, this account is at its maximum of $1,500 and I am no longer adding to it. 

Car: $100 to $150

I recently bought a car (in cash) and opened this fund. I add about $100 to it each month to cover upcoming insurance payments (I pay twice a year), fees, and any upkeep or repairs. This account gets up to about $750 at a time, since I use it at least twice a year for insurance and regular appointments. I don't use this account for my $70/month parking space (or gas), as those are calculated into my regularly monthly budget. 

Clothing: $100

Living in Alaska requires a lot of gear. I need several types of jackets, snow pants, Muck Boots, goggles, and much more to make it through the winter. Most of these items don't last forever (and are expensive to replace) so I keep a clothing sinking fund going for these large purchases. I recently emptied this account buying some summer items, but I usually let it grow to around $500 to $700 to cover inevitable gear purchases. 

Gifts: $50

This fund helps pay for larger purchases for others. I account for a similar amount in my monthly budget as well, but keep this fund to accommodate the larger events that come up throughout the year. Usually this one grows to around $300 before I empty it out again. 

Other: $100 to $300

While those are my standard sinking fund categories, I have other needs that arise at different points and require their own funds. When I was preparing for my move to Alaska, I had a move sinking fund. Before I bought my car, I had a sinking fund for the car purchase. Because our goals change throughout the year, it's important that we are constantly evaluating our accounts to ensure they match our current needs. Some sinking funds can be permanent and others will come and go as needed. 

This method has allowed me to save thousands of dollars more each year than I was when I had a general "savings" account. Each account has a name and a purpose and I don't touch them until I need the money for that specific designation. This way, I am prepared for both expected and unexpected upcoming costs each month and don't have to take from my emergency fund unless it's just that: an emergency.

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