Some banks allow you to open a savings account inside your savings account. You give these accounts specific labels, like Quarterly Taxes or 2018 Italy trip or Game of Thrones tattoo — whatever specific thing you’re saving for. Separating this from your main account makes it easier to see your progress as you save.
How Subaccounts Work
Subaccounts are pretty straightforward to set up. You open a separate account under the umbrella of your main savings account, give it a nickname or a label, and then you can choose to save in this account when you transfer money.
You can even create automated rules for saving toward a specific goal. And Tip Yourself works like your own virtual savings jar. You set up an account, link it to your bank, and you can “tip yourself” in that account whenever you want.
Subaccounts Make Your Goal S.M.A.R.T.
Giving your savings goal, a name makes it specific, which is important and fits with the S.M.A.R.T. goal criteria, which says your goal should be:
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Specific
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Measurable
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Achievable
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Relevant
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Time-bound
If your goal is simply to “save more money,” you’re working with some really vague terms. That goal doesn’t do anything for you. When you save with a purpose, however, it’s easier to see the light at the end of the tunnel and actually stick to the goal — you know exactly what you’ll get out of it.
Feeling Empowered Can Make You Save More
It’s also about feeling empowered, though. A 2014 paper published in the Journal of Consumer Research suggested that feeling powerful can make you save more.
The researchers put subjects in various situations to make them feel like they had more control, then asked them how much they were willing to save. Science Daily explains:
In one study, some participants were made to feel powerful and were asked to sit in a tall chair. Other participants were made to feel powerless and were asked to sit on a low ottoman. All participants were asked to respond to some questions and were then given the option to either collect their study compensation in cash or to put it in a lab savings account. Results showed that the individuals who sat in the tall chair saved more of their money than those who sat on the low ottoman.
In short, the study found that powerful people had a significantly better savings rate. There were caveats to their research, but overall, the paper concluded: “across five studies, this research reveals that feeling powerful increases saving.”
You’re probably wondering: Great, what does this have to do with naming your accounts?
A vague goal like “stop spending so much” or “save more” is not only demotivating, it also subtly suggests you’re doing something wrong and fighting your impulse to spend. There’s probably some truth to that — OK, probably a lot of truth to that—but compare a vague goal to a specific one, like “save for university” or “save for a better apartment,” and the implication changes.
Specific, meaningful goals put you in the driver’s seat because you’re getting something out of this whole saving-money thing.
And that’s true, too — your money habits serve you, whether it’s paying the bills or saving for something fun. When you frame your habit in specific, measurable, and meaningful terms, though, you’re more likely to feel in control, which makes you more motivated to go after your goal and take that epic vacation.
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