By Matthew Marcoux, CFP® / March 1st, 2021
Buckets- Family Budgeting
My wife and I have thirteen savings accounts. Yes, thirteen. Given how we use them, we call them escrow accounts.
I know what you’re thinking: “Why would you ever want to do that?” Though it sounds messy, for us, it just makes sense. We use those accounts to prepare ahead of time for large, one off purchases like annual auto insurance renewals and homeowner’s insurance, as well as surprises like new tires on your SUV. Each year we consider what expenses we may run into, and then divide that number by 12 and work toward saving toward each in a separate escrow savings account. However messy it sounds, I love the visual representation that comes with having funds earmarked and rather than co-mingling.
A few months ago we had to replace the two front tires on my wife’s car after she hit a nail, and while it was a bummer, we didn’t have to worry about how we were going to pay for them. Instead, we reached into our account marked specifically for automobile expenses.
I don’t suggest you go straight to the bank to open up 13 additional savings accounts, but I would encourage you to consider how you can be proactive and organized, ensuring those surprise expenses are covered ahead of time.