Saturday, July 08, 2006

Opening Up a "Fun Fund," Can You Recommend Which Savings To Go With?

Alright, I have a hard time spending money, which is great, but this often leads to aggravation...of myself. You see when it comes time to buy gifts or spend money during a vacation, I just can't do it. I always think about how much it's impacting my net worth, how much I've worked to earn that money, and everything else that goes with spending money. So in order to combat that problem, I've decided to open a "fun fund." This money will be allocated to be spent on gifts, for others and myself, and on vacations, nothing else. Well, if necessary, an emergency emergency fund. But really the whole point of this account is to have it at 0 at least a few times a year. That's right a zero balance in a savings account. This fund will not be tracked in my net worth. It will be considered an expense before it's even actually spent. My requirements for this fund is that it is online, no minimum or very low (less than $100), has a fairly decent return, and can perform regular automatic deductions from another account. I am planning on funding this account with an initial $500.00 and then $100 per month thereafter, but that could change...what do you think is reasonable? I currently have two online savings account one with ING and the other HSBC. I guess having too many account is not a bad thing as comments on my previous post indicates. So which online savings bank to go with? Emigrant? Citibank? VirtualBank? GMAC? Some comparisons I've found: MyMoneyBlog Bankdeals I'd like to sign up for one that gives me some incentive to join. Right now I'm leaning towards Emigrant, just because they are the last of the "top 3" online savings accounts I don't have an account with yet. It also meets the requirements I stated above and MyMoneyBlog is giving away a signup bonus. Please leave me some feedback. Do you think this is a bad/good idea? I'll let you know which I've selected in a few days.


kibitzer said...

It's a great idea. I've been using this approach for years. It's a subset of my budgeting philosophy that I recently posted.
There's nothing like a vacation where the money is coming out of a "fun fund."
I actually take it a bit further than you suggest - I don't expect it to hit zero each year and try to fund at least part of each vacation with cash to help it grow further. The result - every 5 years or so there's money for a stress free BIG vacation. Next summer will be a Mediterranean cruise - already paid for.

LAMoneyGuy said...

I use Paypal for some random money that I don't really consider savings. They don't have a bonus, but the rate is very competitive. I think the fact that it seems like a weird place to keep money, keeps it psychologically different from any other savings. Also, there is not problem with drawing it down to zero.