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How do you save for big expenses? Do you prepare for them and have the money ready or are you shocked at the price and scramble to find the money? I used to be a scrambler. It was very stressful to always be running around trying to find money and feeling like I never had enough. Now I love to use targeted saving accounts to save for those big bills. I use Capital One 360 for our targeted savings accounts. CapitalOne360 is easy to use, you can have multiple accounts with unique names and it has a competitive savings rate of 0.75%!
Previously I have talked about the importance of having an emergency fund, first at $1,000 when you are paying off debt and then at a full 3 to 6 months of living expenses. Your emergency fund is just for emergencies; such as job loss, health scares, etc. Once you save that money, you park it and forget about it until a real emergency comes up. Our emergency fund is also with Capital One 360.
Targeted savings accounts are used much more often than your emergency fund. The purpose of these saving accounts is to save up for big bills that you have, such as your car insurance. For car insurance you have options on how to pay, monthly or the full 6 months. You save money paying the full 6 months; however most people opt for the monthly payment because it is an easier amount to deal with. If you use a targeted savings account you will have the money for the full six month payment and you will save money on the bill.
Once we got married, we combined our car insurance so we could save money. We did get a bit of sticker shock at the full 6 months, $883. We had a lot going on when we first got married, paying off a car, preparing to do our taxes together for the first time (my husband has his own business so it was a bit confusing), a health scare on my side of the family had me flying to MA more than usual and we were also busy being newlyweds!
While we were doing the right thing of combining our insurance, we did not have the money to pay the six months up front. So, we opted to do the monthly payment of $174 for a total of $1,044 for six months.
During that initial six month period where we were making monthly payments, we also saved $150 a month in a targeted saving account. Now we are prepared for our next 6 month payment we have the $883. We will keep saving the $150 per month in our targeted savings account so we can continue to pay the full 6 month bill.
We are saving $322 per year paying our car insurance this way.
$322 of savings per year is huge! This is an extra $322 you can put towards debt if you are still paying off debt. $322 is an extra flight home to MA for me if I need to. And if you need a short vacation, $322 is a one or two night stay at a beautiful resort.
I would encourage you to start using targeted savings accounts to prepare for your big bills. This will take unnecessary stress out of your life. Personally, I love to use Capital One 360 for my targeted savings accounts. I have been a customer since 2007 (when it was IngDirect) and would highly recommend it! Click on this link to use my referral code https://captl1.co/2rnrGS1
Do you use targeted savings accounts? If not, why not? I would love to hear from you!