A great way to manage your budget is by using a targeted savings account for your large and/or infrequent expenses. Another term for this is a personal accrual account. A targeted savings account can be used much like a business uses a sinking fund or accrual account.
You set aside money each month for major expenses such as a vacation, new car, Christmas gifts, car tires, etc. This makes it easier to plan for those big expenses and avoid reaching into your emergency fund, or worse, for your credit card.
Tracking money in targeted savings accounts. You can keep track of the money in an accrual account with pen and paper, or with a spreadsheet like Excel. But it is much easier and more effective to do it directly within your savings account.
Some banks make it easy to set up sub-accounts directly within your main savings accounts, making it easy to keep track of your savings goals. This tutorial will show you how to set up a sub-account with Capital One 360, (formerly known as ING Direct). Some other banks such as Ally Bank also allow unlimited sub-accounts and have a similar opening process.
How to Open a Sub Account with Capital One 360
Note 1: This tutorial assumes you already have a Capital One 360 account. If you do not already have one, you can visit their site to learn more, or to open an account.
1. Log in to your Capital One 360.
2. Click “My Accounts” at top of the page. There will be a drop-down box. Then Click the “Open Account” link under the heading “Manage Accounts.
3. Select the type of account you want to open. You will be given the option of opening a wide variety of accounts, including a savings account, checking account, CDs, home loan, investing account (via Capital One Investing – check out Capital One Investing promo codes if interested in getting a boost on your initial investment with ShareBuilder), retirement accounts, and a Capital One Spark Business Savings Account.
4. Choose a single account or joint ownership. This is important if you want someone else to have access to the account, or you want to more easily transfer the account balance to your joint account owner if you pass away. (Estate planning can be a complicated topic, so please see an expert if you need assistance with this topic).
5. Give the account a nickname. The nickname you choose will help you identify which sub-account you are seeing. You can change the account name or delete the account at any time. The subaccount will be given an account number, but it is there for money transfers and does not affect your main ING account number.
6. Fund the account. You have the option of funding the sub-account from a current ING Direct account, or from an external checking or savings account.
7. Confirm the new account. Agree to electronic statement delivery and Terms and Conditions and you’re done!
8. View your new account. Click “My Accounts” at the top of your screen and you will see the accounts you have set up. You can see my accounts below:
As you can see, I have an Electric Orange online checking account, my main savings account, a sub-savings account for my daughter, and a new car fund. I also have a brokerage account with ShareBuilder.
Start using your new sub-savings account
Now that you have your sub-savings account(s) set up, start using them! You can set up automatic deposits to go to your accounts on a weekly or monthly basis, making it easy to automatically control your budget. Depending on how much control you want over your budget, you may decide to set up several of these accounts. Remember, you can add, delete, or rename these sub-accounts at any time, so don’t be afraid to play around with it a little bit until you find that magic sweet spot.