My revolutioniary idea to improve Bank savings accounts

My revolutioniary idea to improve Bank savings accounts

This may already exist, but I don’t think so as I have never seen it. My idea is to allow banks to let you “tag” money in checking or savings account for a certain purpose. Currently if you want to distinguish money for a certain purpose, say Christmas spending money you go and open an entirely different savings account to do so. This results in another statement being mailed to you and more work and expense for the bank to keep track of this new account.

Money

I simply propose that you allow people to create tags/categories for money and you can move money in and out of these tags, but as far as the bank is concerned you only have 1 account, so you only get one statement and only have to put money into one account. This way I could create as many tags/categories for my money (vacations, Christmas shopping, investing, mortgage, new car, landscaping, etc) and set aside money for these various purposes without the maintenance headache for me and the bank of maintaining/closing/opening 10 savings accounts. This would allow me to easily plan and sort of budget all within my checking/savings account. It would also be really simple to implement (probably would maybe only be an on-line banking feature), but would require very little effort on their end, but I think would be of great value to it’s customers.For those of you unfamiliar with tagging – it’s simply a way to categorize items.

What do you think? Is this idea already being implemented by another bank? Is there an FDIC reason why you can’t classify money in an existing account? Is this a horrible idea?

  • Dean in Des Moines

    ING and most credit unions permit this in various forms. Usually you create a sub-account and give it a name.

    The bank at which I have a checking account does not permit more than one checking or savings account.

  • This is certainly an interesting concept. I am sure if google had a bank, this would happen.

    The only hiccup I see is this. How does a bank know what tag to deduct from? Say you write a check for $100 for something for Christmas. They wouldn’t knwo what it was for so I guess you would have to move cash out of ‘christmas’ and into ‘general’, right?

    Not sure if this effects you, but I put 90% of my payments and bills on my credit card, so it wouldn’t be so informative.

    Now, if every store categorized every product and sent that to the cc company who sent it to the bank and you could see everything together, now that would be awesome. But I think we’re 30 years from that.

  • MFJ

    My theory would be that you would set up a default tag that new funds would go into and deducted funds would come from. Then any money in and out of your tagged regions would be done manually. IE if I know I spent $2000 out of the landscaping fund I would remove $2000 from the landscaping tag to the general tag.

    It’s really just more of a psychological thing than anything. You still only have on account, just you have an easy way to earmark portions of that savings account for your own purposes. It’s just a label and carries now weight. IE if your general tag gets drained it’s not like you would bounce a check or anything like that. I dunno maybe I’m crazy. I just know that I want to start segregating my money out more and instead of keeping it in an offline document that I now have $250 in my make believe vacation fund I could actually keep track of it in my bank account. I’m sure I’m overlooking some things, but I hate having to open extra accounts when the whole purpose really just is a psychological separation of the money and a physical separation is not necessary.

    Like you 99% of my payments are on a CC, but my savings accounts don’t have that much activity. So maintaining the tags would not be a big deal.

  • This is probably a more useful tool in personal finance software such as Quicken than in the bank account itself. I’ve often wished to be able to designate money in Quicken (either cash, checking, savings, etc.) in a certain category.

    I think this is actually reasonable using the “envelopes method” rather than a ledger-oriented system. I’m just not sure I want to switch to an envelopes system. Can anyone comment on the relative merits of each type of system?

  • Relative merit depends on your values. Personally, I think the envelop system is no good simply because you get no interest. But it is certainly good for some people. The only system that works for me is an Excle Balance sheet.

    I get paid on the 15th and the last day of the month. My mortgage is deducted on the 1st and my electric bill is paid then too (they total to be my full paycheck). My credit card bill is due on the 16th and so it is paid on the 16th. after the 16th, any cash that is left is invested, at a minimum in a high yield savings account, until the next month. For me, there is no $$ left over to put a tag on or put in an envelope… Actually, there is 353.48 in there right now… not enought o tag as anythign but general.

  • (Re: “because you get no interest”): Sorry, I meant virtual envelopes rather than physical envelopes. With virtual envelopes there’s no reason you can’t carve your savings account or investments into categories and have things set up so that earnings are distributed proportionally.

  • Yes! I have been wishing there was a way to do this for a while now. I have a bunch of money in my savings account and I have to manually keep track of how much is for one thing and how much for another. It would be good just to tag certain amounts in different categories. You are right that it is mostly psychological, but it would definitely be cool.

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  • I belonged to a credit union that allowed customers to do this. They had a Christmas account with a special interest rate. They also made it easy to set it up for automatic transfers. The catch was it basically worked like a CD. You were required to leave the money in there until a short time before Christmas. But, the only penalty was reverting to the lower interest rate, and it wasn’t that much different.

    I’m no longer a member of the credit union, and this was about 6 years ago, so I’m not sure if it still exists.

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