This is not a new invention or anything; smart people have been increasingly stashing (saving) away money from themselves ever since the advent of the concept of “pay yourself first” (which has existed forever). However, in our case, we sort of *accidentally* extended the concept to suit our purposes - we call it the “pay yourself first - and then keep stealing” concept. I prefer to call it “stealing”, because it involves small amounts of money disappearing from one account (and appearing in other accounts) without we being aware of it (it’s different than just “pay yourself first” - which implies a very conscious effort).
Let me try to explain how it works in our case.
Here is a flowchart of our money-path that summarizes the whole story:
The brick and mortar bank is just a transit point for our money. Over the last few years, we have been tracking our expenses and we have a fair idea of how much money we spend every month on bills and other expenses. We just keep that much in the checking account at the brick and mortar bank and the rest of it goes to our HSBC Direct savings account.
The HSBC account acts as the hub for our financial network - this is in part because of the three online banks that we have accounts with (the other two are ING Direct and Emigrant Direct), only HSBC allows easy addition of other bank accounts - ING and Emigrant require a paper check from the bank you want to add - which I think is stupid given the current popularity of online no-paper-check savings accounts. Since all our bill-payment transactions take place through the brick and mortar bank, we don’t check the status of our online savings accounts regularly - every few months at best (earlier, I used to compulsively check the balances in all accounts almost daily…but gradually I got rid of that habit).
Anyways, sometime in the past, we had to transfer some money to our ING direct sub-accounts for some reason and we used the recurring (scheduled) transaction option at HSBC. I set it up with the intention of canceling it after the required amount of money was transfered. However, things got busy and I forgot about it. A few months later, when I logged in to my ING Direct account, there was a surprise waiting for me there - an extra few hundred dollars among the sub-accounts. I made haste to check the transaction descriptions (to see if there was some mistake) and realized that the HSBC account was steadily pouring in small amounts every month.
At HSBC’s end, our account didn’t feel the pain because the transfer amounts were smaller than our monthly savings rate (so the savings were on the rise even while we were siphoning out some money) - and at ING’s end, the balances shot up from almost zero to hundreds of dollars. Although, it’s our own money, the element of surprise played a pivotal role in making us feel good (it’s like tax returns making people happy even though it’s their own money that they are getting back).
Since then, we have created more sub-accounts at ING Direct for various purposes (like electronics, clothes, etc.) and have started stealing a little bit more from our HSBC accounts. We plan on checking the balance in the ING accounts only around Christmas - by then we would probably have hundreds of saved dollars towards various purposes. Those dollars will be used to pay off our inflated credit card bills in full during the holiday season. Some no-guilt shopping there.
Sometimes, I think it works for us because it’s a bit complicated in our case with so many accounts and money moving all around us - some of it just hides at places and we don’t notice it. [An effect similar to the one in which lots of credit card bills move around some people and then they end up not noticing some of them] - fortunately, we are on the positive side of complications.
Of course, people who are fully aware of their own financial condition and are in total control of their money, hardly need such hacks - personally, even we are doing it just for the surprise element. However, there are a great many people who just can’t keep the money in their savings account and tend to spend it as soon as it shows some signs of growth - this kind of technique would probably work for them - or something along these lines.
Feel free to share your experience with us if you have tried (or are trying) something similar - and whether it is working for you or not.
Some HOW-TO tips for the newbies
To set up recurring transfers from HSBC Direct savings account to any other account :
- Follow this path: Log in to HSBC Direct –> Bank to Bank Transfer –> Transfer funds; at the bottom of that window there is a “Recurring Transfer” option.
To set up recurring transfers from ING Direct savings account to brick and mortar accounts (or other account paper-check-issuing account that ING can verify):
- Account main page –> Transfer Money –> Automatic Savings Plan (this is fairly popular among many folks who have ING Direct accounts)
- Here is an updated list of high-yield online savings accounts being currently offered by top banks. Feel free to explore them and make the most of your saving habit.