SAVINGS ENVELOPES
One savings account can support several goals.
Savings envelopes—often called sinking funds—let you assign portions of one real account balance to different purposes without opening a separate bank account for every goal.
Reserved is not additional cash
If a savings account contains $5,000 and $3,500 is assigned to envelopes, you still have $5,000 at the bank. The envelope system explains what $3,500 of that balance is intended to do.
Use target dates carefully
A goal with a target date can be translated into a required contribution pace. But several goals compete for the same future cash, so each target should be evaluated alongside bills, debt payments, and other savings goals.
Keep an unassigned remainder visible
The difference between the real account balance and total envelope allocations should remain visible. That prevents a planning layer from implying more savings exists than the bank actually holds.