What if there was a way to keep track of your savings without the need for complicated Excel spreadsheets? Well, there is, and it’s the method we call ‘bucketing your savings.’ Not only could using savings buckets make your life easier, but it could help you save more money and reach your financial goals even faster, too! That’s why we want to further explain what savings buckets are in this article.  

Especially when used for larger expenses, such as a down payment on a house, a new car, or a dream vacation, savings buckets can be powerful. Saving money for these larger expenses often requires significant effort over a prolonged period of time. Keeping things organized and maintaining your motivation by using saving buckets will come in very handy!  

When used in combination with a High-Yield Savings Account (HYSA), you can let the interest rate do its work and help you earn even more on your savings. The interest you’ll receive on your savings can snowball over time, leading to what Einstein called the “eighth wonder of the world,” compound interest. But more about that later on in this article.  

There are plenty of reasons to love savings buckets, and that’s why we want to explain what they are, how they work, and why they can be so powerful. Let’s start saving!  

What is a savings bucket? And how does it work? 

A savings bucket is a strategy in which you allocate your savings into different categories, aimed at specific goals. Essentially, you define different buckets based on your financial goals, each labeled with a different savings goal. After defining the buckets, you fill up each bucket and work your way toward the goal you defined. 

Nowadays, these savings buckets can be very interactive and virtual, which makes them even easier and more fun to work with. Banks that offer savings buckets may let you enter your goal amount and goal date, after which they will show you how far you are on your way with a progress bar or pie chart. Neat, right?   

Why would one use savings buckets? 

There are plenty of reasons to start using savings buckets. The main motivation behind why they’re so powerful is that they can help you save more money and stay organized in an easy way. Let’s explain why in more detail below.  

Save More Money 

Saving buckets can help you save more money because by using savings buckets, you’ll have crystal clear priorities as to where your money is going. You won’t just be ‘saving some money’; you could be putting real money toward a down payment on the house you’re saving for over the course of 2 years, for example. Being this clear, along with the visual progress, helps you to stay true to the course, and ultimately helps you save more money.  

Stay Organized 

Next to saving more money, using saving buckets has the additional benefit of helping improve your overall financial organization. By separating your savings into buckets, you force yourself to clearly define goals. Again, instead of generically ‘saving some money’, each dollar goes toward a specific goal, such as a down payment, a new car, or a vacation. The clear categorization provides clarity. Plus, it has the added benefit of making it extremely easy to track your progress toward each of your savings goals.  

Reach Goals Faster 

Because of the increased motivation you could get by using saving buckets, as well as having a clear picture of your current situation and your progress, you could reach your savings goals faster. Also, defining your savings goals and allocating funds to the different goals you have could allow you to thoroughly think through your financial situation. This may come with a critical review of your spending habits, allowing you to identify areas where you could save even more money.  

You May Not Need Complicated Spreadsheets or Budgeting Apps to Keep Track of Your Savings 

If your bank offers saving buckets or savings goals as subaccounts under your primary account, you may not need complicated spreadsheets or budgeting apps to keep track of your savings. Instead, you may just open a savings bucket or savings goal within your main savings account, and just like that, you’ll have all you need to track your savings progress. Let’s keep it simple. 

Why use a High-Yield Savings Account (HYSA)? 

Higher Interest Rate 

Creating savings buckets with your HYSA can be powerful. First up, because of the relatively high interest rate on a HYSA, compared to a traditional savings account, you’re allowing your money to grow faster. This could help you to reach your savings goal even faster. 

Easy Access to Money 

HYSAs are known for their easy access. So, when you’re using a HYSA to build up your emergency fund, you can take out your money whenever you encounter an emergency for which you need the funds. Or, when you are saving up for a car and a great deal falls in your lap, you can take out the money right then and there. Plus, having easy access to money has the added benefit of allowing you to adjust your allocation of funds over the various savings buckets quite easily.  

What if your HYSA doesn’t have a savings bucket functionality? 

If you already have a HYSA and it doesn’t have a savings buckets functionality, there are a few workarounds that may mimic this functionality. Of course, it would be even easier to move your money to a bank that offers this functionality, but if that’s not an option, you can still use the theory behind savings buckets without having the functionality itself. 

The first thing you could do is open separate HYSAs at different banks. That way you could use each account for a specific goal. While this workaround offers a clear separation between your different savings goals, managing more than one savings account may become cumbersome.  

Or, you may consider budgeting with a single HYSA. You can do this by using a budgeting tool or custom spreadsheet to track your savings goals within the HYSA. That way you may create virtual ‘buckets’, depending on your goals, and keep track of them. This workaround makes managing your money somewhat easier, however, it requires discipline to stick to your buckets. Plus, you must rely on third-party budgeting tools. 

There are plenty of online banks that offer HYSAs with built-in ‘savings buckets’ or ‘financial goals’ functionalities. Their accounts may vary widely in terms of interest rate, though, so make sure to diligently research the account’s terms before opening an account with a bank. The best choice depends on your specific needs and preferences.  

Saving Money Can Be Fun and Easy 

Using savings buckets is a powerful way to organize your savings. It helps you to make a clear distinction between your savings goals and stay organized, and could even help you reach your goals even faster. Even more so when used in combination with a HYSA, using savings buckets to save for larger expenses can be very powerful. As HYSAs offer relatively high interest rates, while still allowing easy access to your money, combining a HYSA with savings buckets could make managing your personal finances a whole lot easier. Let’s make saving money fun and easy!