Budget category explanation: Savings

There are only three lines for savings on our budget: emergency fund, kids' savings, and retirement.  We have a $1,000 emergency fund in an account that I really have not accessed since we set it up, so it's just sitting there earning interest.

Each of our children have a savings account that I deposit a tiny amount in every week.  I like to think that at least I'm in the habit, even if it's not that much, at least it's something.

My husband has a retirement account that he automatically deposits to with each paycheck.  Right now, it's only at 3% of his paycheck, but I'd like to bump that up gradually.

Now, that's only the tip of the iceberg of our savings accounts.  So far, (not including retirement which is spread out across different accounts, obviously) that is 5 savings accounts, right?  One for each of the kids, and our emergency fund.  Well, we also have a savings account tied to our checking account (that makes 6), a short- term savings account (7), a long- term savings account (8), and a health savings account (9).

The health savings account is tied to our health insurance plan, and money is direct deposited to it every paycheck.  Most of our medical expenses are paid with this account, unless something big happens, (like having a baby or surgery), and we have to pay some out of our checking account or savings accounts.

The long term savings account is divided into our "Disney" fund (we plan on going there in about 3 years) and our "dream home" fund (which is where I'm squirreling away all of my pennies).

The short term savings account is where most of our money goes each paycheck.  I actually have an exel spreadsheet (because I'm that much of a nerd) where I divide all of our bills into biweekly "payments" which are deposited each paycheck and taken out weekly.  Pretty much all of our bills are paid automatically, so I just sit down once a week and transfer the needed funds from the short term savings account to our checking account for the bills that will be coming due in the next week.

This is especially awesome for things like car insurance because I get the discount for paying 6 months at a time, and it's just sitting there earning interest until it's ready to be paid.  It is also great for real estate taxes and homeowner's insurance, because I'm earning the interest on it instead of the bank if I would have chosen to have it paid with escrow when we had a mortgage. 

For bills that are variable, like power, I add up the previous 12 months of bills, divide them by 26 (for our biweekly paycheck), and that is what goes into the savings account.  That means I'm not taking the full amount out when the bill is low (like spring and fall), so that there is some money left for the higher bill times (like summer and winter).

As I stated before, my husband travels a lot for work and pays for his expenses with a credit card and then gets reimbursed by his company.  When we get that reimbursement, it goes into the savings account, and when he pays for something and the credit card bill comes due, it comes back out of savings.  It took me a little while to build up, but I did put some extra into savings for this, because sometimes he doesn't get reimbursed before the credit card bill is due, especially when he has been busy and hasn't had time to fill out the necessary paperwork to get reimbursed.

So, in case you were curious, these are all the lines that are transferred to short- term savings  at payday and taken out as needed:

homeowner's insurance
household improvement/ repair
real estate taxes
internet
phones
power
water and trash
car insurance
gas
car registration
car repair, maintenance, and replacement
property taxes
clothing (all)
personal (all)
entertainment
vacation
student loans

That leaves one more savings account to explain.  The savings account tied to our checking account is reserved for anything we put on the credit card.  Once a week, I check our credit card balance, and transfer some to savings so that the total in savings always equals the credit card balance.  A few days before the credit card payment is due, I transfer it back to checking.  This keeps me from spending more money than we really have, plus I'm earning a couple of pennies in interest in the meantime :)