Opening additional savings accounts is quick and easy. In banking apps and online banks, you can usually open several accounts at no cost and give each one a name that actually means something.

Why do the names matter?

Isn’t it fine to have several accounts called generic bank names?

Not really.

I prefer clearer names, and often more of them.

We open these accounts because we want to build structured, regular savings. When we give each account a specific name, the purpose becomes more visible. We can follow our progress more easily, and it becomes simpler to plan for the expenses the money is meant to cover.

One of the most important parts of financial security is paying for what we buy.

We don’t take out consumer loans. We don’t pay later through instalment plans. An emergency fund gives us room to deal with unexpected setbacks, but many expenses shouldn’t come as a surprise. We should save for them every month, automatically.

Setting up your savings

The accounts are created in your online bank or banking app. Then you set up regular transfers, so money moves each month from your salary account to the right savings account.

That way, when the money is needed, it’s already waiting for you.

You pay what needs to be paid.

It doesn’t have to be more complicated than that, although each savings goal does need to be planned.

Examples of regular savings

Let’s look at a few common examples.

Christmas

Creditcard spending is, on average, much higher in December than during other months of the year (roughly +20% in Iceland).

Christmas can be expensive, but it comes every year. That means it should be fairly easy to estimate how much needs to go into a Christmas account.

A family of four may need to plan for a fairly large amount, depending on gifts, food, travel, activities and everything else that tends to arrive at the same time.

A reasonable Christmas savings target might be:

• ISK 10,000 to 25,000 per month, depending on family size.

The car

Cars are often necessary, but they lose value, cost a lot to run and become even more expensive when we finance them with car loans.

So we don’t take out car loans.

We save for replacing the car every few years, whether we plan to buy a similar car next time or not.

Let’s say you buy a car for ISK 5.5 million and can sell it for ISK 2 million five years later. If you want to replace it, you need to save ISK 3.5 million over those five years.

There is no law that says everyone in Iceland has to take out a car loan.

But if we want to avoid one, we need to save.

A possible car replacement target:

• ISK 50,000 per month.

Travel

It should really be an unnecessary habit to spread out the credit card bill after coming home from holiday.

There are no worse financial hangovers than that.

Instead, set up regular savings into a travel account and enjoy the trip without worrying about the bill waiting at home.

For a holiday costing ISK 500,000 a year, a possible savings target is:

• ISK 40,000 per month.

Home maintenance

It costs money to keep a roof over your head.

Windows need replacing. Furniture and appliances wear out. Homes need painting. Things break.

Many households regularly set money aside in a home maintenance account, so they have funds available for smaller repairs and improvements. Larger projects, of course, need to be planned separately.

A possible home maintenance target:

• ISK 10,000 to 20,000 per month.

Make the bank do the work

By letting the online bank or app handle these regular transfers, we make life much easier without much effort.

We earn interest while we save, and we avoid the harmful cost of consumer loans that might otherwise have been taken.

Over time, we can afford more. The long-term financial effect can be significant, because regular saving increases the breathing room in the household budget and can save large amounts of money.

But we shouldn’t underestimate the emotional effect either.

Financial problems and unexpected expenses are among the most damaging sources of stress and anxiety. We feel better when our household finances are safer and more predictable.

So what are you waiting for?

Start organising your savings, open the app and watch the money roll into the right accounts.