When I was very young my grandparents opened a “Passbook” savings account for me and my older brother. I don’t recall the amount but it wasn’t so much about the cash as it was the concept. The idea – though it was likely lost on me at the age of 5 – was in order to have money for something I really wanted later I needed to save the money I had on me now.
As you might imagine it was a hard pill to swallow as I was already fully ingrained with the idea of stuff and money was my golden ticket to getting more stuff. Irregardless of my wants at the time though, the money stayed in the account and every so often I would be taken to the bank to learn the ropes and deposit some money I had been given for a birthday or perhaps Christmas. Though it never amounted to much it started me on the path of thinking that the place where I was holding my money defined what it was for.
In reality, nothing could be further from the truth.
Unfortunately, far too many people were brought up the same way and to this day ‘Savings’ accounts are a booming business for banks and even credit unions in the form of ‘Share Accounts’. Though I can’t postulate with any authority that the concept of savings account wasn’t much more than a marketing move many years ago I think it’s a fair bet to say that it’s probably not far from the truth. The simple but powerful idea that you need to save had banks lining up to help you do just that so that you’d deposit more making their business boom with the fuel of your dollars. But I digress.
When it comes right down to it my grandparents had it right. If I wanted to have money around later, or be able to purchase something expensive I had to save for it. The trick is, how to keep track of what all those dollars were doing for me, or, what I wanted them to do while they waited. The ‘Savings’ moniker was (and still is) too generic.
Enter budgeting. No, I don’t mean any sort of crystal ball, wet finger in the wind guess but instead a solid on paper (okay, computer) plan for what you expect and want to do with your money.
It’s really that simple and I may as well cut to the chase and tell you about the software that I use. It’s long name is You Need A Budget or YNAB (why-nab) for short. With it, I’m able to take all of the money that I have, decide what I want to do with it proactively, and then as long as I follow that plan I’ll gain. I won’t go into all of the details as to how it works here instead you should check out how savings work on their site. Suffice it to say though it allows you to decide what you want to do with your savings. Are you saving for a vacation? Then put it in a vacation category and it will be there when you’re ready to head out. Are you saving for just in case? If so then you can collect that and the money will be there when you desperately need it.
In the spirit of full transparency, I have to tell you that I actually work for YNAB. But this isn’t a marketing ploy by them, this is all just me. Steve, the customer support guy. I used to be terrible with money until I stumbled across YNAB back in 2006 then one thing led to another and now I’m part of the YNAB team.
The bottom line though is this; it doesn’t matter where you save your money as the place that holding it is just a name, it’s just a container, what matters is what you plan to do with it.
So, why do you save?