Save. Spend. Splurge.

Why do we need so many savings accounts and funds, anyway?

Really, all of my savings = my savings.

It goes into one big category of “savings”, but within that category, I have allocated parts of my money to different priorities.

At any given time, here are the following funds I have:

  • Short-Term Savings
  • Emergency Fund
  • Retirement Savings
  • Investing Fund
  • Other Funds

 Short-Term Savings

  • PRIORITY: Pay the bills
  • MONEY RISK: Very Low

I have a short-term savings fund which is just my chequing account.

I put money in here about $2000 or so, to cover bills like my rent, utilities, cellphone, groceries and so on.

It’s my daily banking account, and I keep a fairly low balance in there because I don’t want to miss out on higher interest rates by leaving my money elsewhere.

 Emergency Fund

  • PRIORITY: Just in case I quit my job or for other rainy days

I set aside about $50,000 in an emergency fund.

It’s enough to last me about 2 years if I lived moderately (no traveling, just living expenses). It could probably last me 3 years if I was frugal.

I used to have more money in here, but it was sitting there idly, collecting low interest rates, so I invested it instead.

Update: I have $10,000 in here now, the rest is in investments. 

 Retirement Savings

  • PRIORITY: For the long-term, when I decide to retire
  • MONEY RISK: Very High — I’m young & can weather the financial storm

I also have a retirement savings fund that is meant for exactly that: Retirement.

When I turn 65 (or younger), I will retire and have saved enough money to live out the rest of my golden years without having to ever work again.

 Investing Fund

  • PRIORITY: Just to have my money make more than in a savings account
  • MONEY RISK: Moderate to Very High — I want to make money & I’m young

With all of the extra savings I have set aside that are not earmarked for Emergencies or Retirement, I invest it.

I put it into index funds, no stocks (too volatile and time-consuming for me), and dividend-producing mutual funds.

Not very sexy, but I am in it for the long-haul.

Normally people might put this money in a down payment towards a house (physical investment), but I am not really someone who wants to be tied down to a property anywhere…. yet.

I am also not entirely convinced a house is the best investment you can ever make; perhaps it was true 50 years ago, but today, times are different and the answer is: it depends.

Therefore, I just invest the money into index funds rather than put it into a house.

 Other Funds

  • PRIORITY: For spending on life
  • MONEY RISK: Low — I want the cash there to be used!

I usually always set aside some money every year for things like traveling (about $5000/year).

It’s what I like to do, and it is best done when I have the cash to do so.

No guilt here!

Some people use this as a “BUY A HOUSE” fund, or a “BUY A CAR” fund.

It’s whatever you want, but make sure it makes sense for your lifestyle.

 It’s all savings in the end

It might seem confusing to have money allocated everywhere, but each fund and account has its own priorities and risks that makes sense to me, as it is my money.

For instance, I wouldn’t want my emergency fund money to disappear over night, when I need it the most, just as I wouldn’t mind terribly if my investments or retirement took little dips along the way, because I’m investing for the long-term and I wasn’t planning on needing the money tomorrow, anyway.

Regardless, the only thing you need to remember from all of this is: START SAVING.

After you amass a nice little amount of $5000 or more in your bank account, start thinking about what you should earmark that money for — emergency fund? retirement? — and go from there.

You will learn slowly what you want to do with your money, as you start to get more and more interested in it.


  • Aloysa @My Broken Coin

    This post actually gave me an idea to have a separate account called “Life.” 🙂 And for that, I thank you! 

  • B. (Below Her Means)

    Thank you for posting this, it’s perfect timing for me. I have a long-term savings account and a Roth IRA but no short-term savings, quite literally. I’ve been using the excuse of paying down my student loans aggressively but that’s no excuse for $0 in short-term. 

  • tinysarah

    You will learn slowly what you want to do with your money, as you start to get more and more interested in it.” – I like this very much. Sometimes I feel interested, sometimes I don’t. Maybe that’s just youth, or maybe I’m a bit financially irresponsible. Either way, I think that rings true!

    • Mochi & Macarons

      It was true for me. I didn’t think twice about money when I was younger. $60 in the pocket or $60 in clothes was the same to me until I realized what saving truly meant for my life and future.

  • Leigh

    As I was waiting for the condo to close, I definitely started to feel this. I have now cut things down to checking (monthly cash flow), cash reserves (emergency fund – about $24k), mortgage, and retirement.

    When it comes down to it, it’s all summed up to your net worth, no matter where it is.

    I’ve stopped splitting short-term savings up into targeted accounts and just have a spreadsheet for my checking account. Travel, property taxes, yearly bills, etc. are all tracked there and paid out of checking. That’s why its balance can be kind of high at times.

    I don’t think I’m going to set aside money to buy my next car until the mortgage is paid off since that is at 3%, whereas savings accounts are at < 1%. The reason? It's all one big pot when it comes down to it.

    • Mochi & Macarons

      I agree with that point. I am really trying to keep my accounts minimal because I am SURE to forget where some things are if I am not careful to close accounts that are dormant.

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