Over the last couple of years I’ve become a big fan of setting up separate savings accounts, or sub-accounts, for saving towards a specific goal. As a visual person, it helps me to see a goal description and a balance next to it to show how close (or how far) I am to reaching that particular savings goal.
We currently have a number of sinking funds established in an online savings account for things like Christmas shopping, vacations and insurance premiums. We also continue to save towards a fully-funded emergency fund of six months of expenses. However, I feel compelled to save towards a new goal.
Ever had the chance to take a last-minute trip you wanted to take, but didn’t have the money for it? Maybe it was to attend a conference on a subject you are interested in, or to visit a place you have wanted to visit since childhood. With an opportunity fund you would be able to answer when opportunity knocks.
I am reluctant to use our savings for any reason other than what the money is intended to cover. For instance, I don’t dip into our emergency fund if I find a great deal on a new laptop, and I don’t pull money out of the Christmas Savings account to buy the kids a bike in June. For the same reason, I personally find it hard to take advantage of opportunities outside of the monthly budget, and outside of our targeted savings goals. Here are a few examples of occasions to use an opportunity fund:
- Last-minute travel deals
- Clearance prices on household supplies to stockpile
- Pay cash for real estate (this is more of a “someday” goal)
- Giving. How many times have you wanted to give money to a neighbor or loved one, but didn’t have any to spare?
Why Not Use a Credit Card?
Many people simply carry a credit card for covering life’s opportunities, which borders on impulsive spending, and we all know impulsive and credit cards don’t mix. Until I’ve reached debt freedom, I’ve sworn off credit card use. For now, I find it too tempting to swipe a credit card and pay it off. I still need the transactional pain of paying cash or watching it immediately leave my checking account through a debit card.
So, I think of an opportunity fund as sort of my own personal line of credit, except I don’t have to adhere to credit card issuers’ ridiculous rules and be subjected to their frequent rule changes. It is empowering to seize the moment, pay cash, and not have a debt following me around long after.
Where to Save For Opportunities
My wife and I have decided to park our Opportunity Fund in one of the top online banks at ING Direct. The money accumulates at a slightly higher rate of interest than at a traditional savings account, and I’m a big fan of their online interface and transfer options. If something comes up, we can transfer money to our checking account in only a couple days, or simply write a check from our local emergency fund and replenish it from the Opportunity Fund. Either way, it’s nice to have some cash on hand specifically for an opportunity- most of the time it doesn’t knock twice!