Boost Savings and Stay Motivated by Putting Your Money into Buckets

Discover the bucketing method of saving money, a powerful financial strategy that divides your savings into categories for specific goals.
Written by Anna Baluch
Financial Expert
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Managing Editor
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Whether you’re new to saving money or looking to improve your strategy, categorizing your savings is a brilliant way to visualize your financial goals.

Also known as bucketing, this concept allows you to organize your financial goals and save for a variety of short- and long-term goals.

Learn how splitting your savings into buckets works in more detail so you can determine whether it makes sense for your unique situation.

What Does It Mean to Put Savings Accounts in Buckets?

Remember the envelope method of saving and budgeting spending money?

With this method, you take several envelopes with an expense or goal written on each one and add the cash to each envelope that you have budgeted for that expense or goal.

You can add or take away from the envelopes as you meet your goals or pay your bills.

Imagine the Envelopes Are Buckets You Access Online

When you put your savings account funds in buckets, you’re doing the same thing, but you’re setting up digital envelopes for each of your savings goals and earning compound interest in the process.

The bucketing method of saving money is a financial strategy that divides your savings into different “buckets” or categories based on specific goals or purposes.

Bucketing helps manage money more effectively by providing clear objectives for each category, making it easier to track progress and stay motivated.

Some banks and financial institutions offer buckets, which can simplify the way you save money so you can lead the life and future you desire.

Unlike the envelope method, you can set your digital buckets to receive more money automatically according to your budget.

How Bucketing Works

You don’t have to create and maintain spreadsheets or open multiple saving accounts (but you can if you want), as bucketing takes the hassle and guesswork out of saving.

Not only does bucketing automate the process, but it can also motivate you to continue to work toward your goal.

You’ll be able to see all your goals in one place and gauge your progress as you earn interest on your money.

In addition, bucketing may help you understand whether you need to cut back on some of your expenses so you have more money to dedicate to your savings goals.

Step 1: Identify Your Buckets

Step 2: Determine Your Goals and Amounts

  • Set specific goals for each bucket and determine how much money you need to save for each one.
  • Even if you have to start out with $5 in each bucket, small amounts add up.
  • Establish a timeline for achieving these goals to help prioritize your savings.

Step 3: Allocate Your Income

  • After covering essential expenses (rent, utilities, groceries), allocate a portion of your remaining income to each bucket based on your priorities and timelines.
  • You can use a percentage method (e.g., 10% to an emergency fund, 20% to short-term goals, etc.) or fixed amounts.

Step 4: Choose Appropriate Accounts

Step 5: Automate Your Savings

  • Set up automatic transfers from your checking account to each bucket to ensure consistent contributions.
  • Automating the process reduces the temptation to spend the money and ensures steady progress toward your goals.

Step 6: Monitor and Adjust

  • Regularly review your buckets to track your progress and make adjustments as needed.
  • Re-evaluate your goals periodically to ensure they align with your current financial situation and priorities.

Example Savings Bucket Scenario

Income Allocation: Suppose you have $1,000 left after paying monthly expenses to allocate to your savings buckets.

Where to Find the Best High-Yield Savings Accounts

MoneyRates has found that a specific group of banks consistently offers the most competitive savings rates.

Spending a little time shopping for a better rate now, particularly at one of these banks, could pay off for years.

Benefits of the Bucketing Method

The most obvious benefit of the bucketing method is saving money and getting control of your finances.

However, the benefits of bucketing don’t end there.

Should Everyone Bucket Their Savings?

If you prefer a traditional savings strategy, such as a spreadsheet or journal, for example, bucketing may not be a good fit.

You might also consider an alternative method if you’d like a more hands-on approach to saving. Bucketing is designed to help you “set it and forget it.”

A spreadsheet or another savings strategy can allow you to be more involved on a day-to-day basis.

Pros and Cons of Savings Buckets

Before you go ahead and set up savings buckets, be sure to consider the benefits and drawbacks.

Pros

  • Easy Tracking: With separate buckets, you’ll know exactly how much you’ve saved for each one. For example, you’ll see that you have $5,000 in your emergency fund and $3,000 in your vacation fund.
  • Reduce Temptation to Overspend: By keeping all your savings in one place, you’ll be more likely to stay within your budget because a specific amount of money can be automatically dispersed to each bucket on a regular basis.
  • Flexibility: The bucketing strategy is flexible because you save for any financial goal and choose how much to allocate to it. You can also decide how often you want to add savings to it and where the money will come from.

Cons

  • Not Available Everywhere: Only some banks and financial institutions offer savings buckets. You might have to switch banks to take advantage of this strategy.
  • Potential Bucket Limits: Depending on the financial institution, there may be a cap on how many buckets you can create. If you have many goals, this can be problematic.
  • Goal Prioritization: You might find it challenging to determine which goals are most important and how much money to contribute to them. You’ll need to sit down and really consider which goals take precedence.

Savings Accounts That Have Savings Buckets

If you’re interested in using the bucketing strategy to meet your goals, here are some options you may want to explore.

One Banking

One Banking is a banking app that lets you create up to three goals or “buckets” without worrying about minimum balances or monthly fees.

You can also earn up to 5% cash back when you shop at select retailers. In addition, there’s an early direct deposit feature that you may use to get paid up to two days early.

Betterment

Betterment is a robo-advisor you can use to invest your money in exchange for a fee. You may choose from different portfolios to meet various financial goals.

Once you set up your account, you can set up one-time or ongoing deposits from your external bank account. Betterment will then create customized investment portfolios to help you with each goal.

Ally

Ally is an online bank with a tool called Savings Buckets. This tool allows you to organize your money easily and visualize various savings goals.

Ally allows you to automate the savings process through recurring transfers or roundups. You may create up to 30 buckets at a time.

SoFi

SoFi allows you to split your savings into buckets known as “vaults.” To earn the best rate, however, you’ll need to set up direct deposits to your SoFi checking account.

You can fund your vaults via transfers or roundups. There is a designated vault for emergency expenses called the SoFi Money Emergency Fund and a limit of 20 vaults.

Wealthfront

Wealthfront is a robo-advisor software that lets you keep your money in a single cash account, which includes your checking and savings.

You may transfer funds into specific categories and track how much you’ve saved toward each one. Plus, there’s an option to link your account to a debit card.

What If Your Savings Account Doesn’t Have Buckets?

If buckets aren’t available with your savings account, here are several alternative options to look into.

Open Multiple Savings Accounts

You can always open several savings accounts for different financial goals.

This can make it easier to keep tabs on your progress and ensure you don’t overspend in one category.

Download an App

There are plenty of free and paid savings apps that aim to simplify the savings process.

Depending on the app you choose, you can create and stick to a savings plan without manually tracking each goal.

Set Up a Budget

Creating a budget, such as the pay-yourself-first or 50/30/20 budget, can help you tackle multiple goals at once.

Figure out which budget works best for you and follow it.

FAQs

Are savings buckets free?

In most cases, you don’t have to pay to use the savings buckets feature. Most financial institutions offer them as an extra perk to current customers.

How can I find extra money for savings?

If you find that you’re short on funds, you can always pick up a part-time job, sell unwanted items, or start a side hustle. The extra income may allow you to meet your savings goals faster.

How often should I contribute to savings buckets?

You decide how frequently you’d like to add money to each of your savings buckets. Depending on the goal and your particular financial situation, you may do this daily, weekly, bi-weekly, monthly, or annually.

About Author
Anna Baluch
Anna Baluch is a personal finance writer and expert who writes about financial topics ranging from personal and student loans to mortgages, debt relief, auto financing, and budgeting. As a contributor to MoneyRates, Anna’s insights are backed by her hands-on experience, exemplified by her achievement of paying off her mortgage in just 16 months, a journey she shared on the “Burn Your Mortgage” podcast in 2019. Her knowledge and expertise have appeared on personal finance platforms such as LendingTree, Business Insider, Credit Karma, Experian, American Express, Rocket Mortgage, U.S. News & World Report, and Policygenius. Anna is dedicated to guiding consumers toward making informed financial choices.
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