Savings Trickery

I am a big financial-advice junkie.

I love reading books by all the experts; Dave Ramsey, Suze Orman, David Chilton, and especially, Gail Vaz-Oxlade. Maybe it’s because Gail is so direct, or maybe it’s because she’s one of the few offering Canadian-specific advice, but there’s something about her that really resonates with me.

I can’t remember which book of hers it was, but there was a passage about our savings account comfort thresholds. She opened my eyes to the idea that everyone has a certain level of money in an account that they feel comfortable with, whether it be $100, $2000, $5000, etc. Some people are natural savers and need the safety net of thousands of dollars, while others, like me, feel uncomfortable having more than $100.

Her method for overcoming this discomfort is to open multiple accounts. If you spend anything over $100, then open four or five no-fee bank accounts and keep $100 in each of them.

Thinking about that now, I should probably try to go back and find that passage because now I’m sort of seeing that as a short-term solution, but not really one that will easy translate to longer term. I can’t imagine having to save for retirement in a thousand different accounts.

Or maybe it’s only supposed to be a short-term solution because as you open multiple accounts, maybe your mindset will begin to change and you’ll realize you’ve been tricking yourself into saving more money and you’ll be able to fill each account a little more.

It wouldn’t surprise me if this were the case, as a lot of financial techniques seem to be based more on behaviour, rather than math. Dave Ramsey, in particular, has a lot of advice that seemingly goes against logic, but is designed to change the way you think and behave. For example, when paying down debt, he suggests you start with your smallest debt first, not the one with the highest interest. The idea is that paying off a small debt will feel like an accomplishment and give you the motivation to continue, while focusing on the highest interest debt may take too long and you’ll quit before you see any real results.

I think I’m going to give the multiple accounts idea a try. I’ll put as much money as I can in an account and when I start to get all twitchy about wanting to spend it, I’ll give the bank card to my husband to hide and I’ll open a new account and start contributing to that one instead.

I’m not sure how well these mind games really work, but it’s worth giving them a try. After all, as Dave Ramsey points out – (I’m paraphrasing because I can’t find the exact quote) – If I was so smart, I wouldn’t be so broke.