People come to frugal living and couponing for so many reasons. It could be a sudden change in the finances, fear over rising prices, a simple desire to cut back on expenses…or even just because you want to “play the game” to see how much free stuff you can get.
Now that you are saving money, you have another issue: what to do with those savings?
If you read this post, you know the importance of developing and sticking to a budget as well as using the cash envelope system to help you stick to your budget. If you were realistic, you entered your estimated current grocery spending in the appropriate column (with the hope of decreasing that amount). With any luck, you have been spending less than your budgeted amount. Now what do you do?
Cut yourself a check – that's what!
But where should the money go?
Like Dave Ramsey, I believe that you take care of your basics first – food, utilities and housing. If you need those grocery savings to keep the lights on, then obviously it goes to that.
If you have any debt whatsoever, I recommend putting that money back in your bank and immediately cutting a check for that amount (even if it is only $10) directly to your creditor with the smallest balance. Don't simply roll it back in to your “bill-paying money” with the intent of adding it to your budgeted payments at the end of the month. It won't be there by then!
Next: do you have a Baby Emergency Savings Fund? There are two types of savings accounts that we have right now. We have our “Baby Emergency Fund” of $1,000.00 in the same local bank as our checking account. This bank pays very little interest (less than 1%), but by having that portion of our savings there, we have immediate access (through online and phone banking) if we are at the hospital and need to make a co-pay and need to transfer the money.
Next it's time to work on your “real” Emergency Savings Fund. This is the money that is going to get you through a layoff, an accident or the bathtub falling through the floor and in to your kitchen sink. It is recommended that you have 3 to 6 months of expenses in your Emergency Savings Fund at all times and that you keep it liquid, but not overly easy to access. This avoids the temptation for my husband someone to declare that a 50% off Flat-Screen Plasma TVs sale at Best Buy is an “emergency”. This is the fund that you want fairly liquid AND earning you money. Check with your local bank, but in most cases the better interest rates will be found online.
We have our Real Emergency Savings fund right now in an Orange Savings Account with ING Direct.
We signed up with them because they were giving a $25 bonus when we started our Emergency Savings account, but I don't see that they are giving that bonus now. Their interest rate is 2.75%, the signup took less than 5 minutes and you can open the account with as little as $1. It links to your “regular” checking account so you can make transfers of all those little overages from your weekly/monthly budget as you find them. If we need to access it, money can be transferred in to our regular checking account in 3-5 days.
Another online option is HSBC Direct.
We have been thinking about changing to them, as their interest rate is 3%. It works on the same premise as ING (link to checking accounts, etc) and you can get a debit card linked to it as well. It also requires just a minimum of $1 to open an account.
But no matter what you end up doing with with your money (paying the gas bill, the credit card or putting it in savings), the most important thing is to do SOMETHING constructive with it. Don't just fork it over to Starbucks or Kohl's. Make your supermarket savings work for you.
And if you do it right, you can end up with a tidy little savings account if you start this at the beginning of your coupon journey. Look at it this way: If you budget $200 per week for groceries and can manage to shave just 25% off of that amount through using coupons, at the end of the year you will have $2600 in your savings account.
Sounds good to me!