by Our bet is you have never heard the term squirrel account. A buddy of ours once commented that we seemed to have funds for different reasons. He dubbed them “squirrel accounts” and it is a term that we have used ever since.
Now before you think we have gone off the reservation let’s outline a few challenges that have happened to us in the past and situations that have happened to those we know.
- You had an unexpected car repair bill for $323
- The garbage disposal at the house went out and you need $175 for a new one plus maybe a few extra bucks to have someone install it
- Your pet needs to go to the vet and your pet insurance will not cover 100%
- It’s now winter and you realize that the coat from last year has holes in it and is beyond repair
We think you get where we are going here. In life there are unexpected expenses that come up. This can greatly impact your monthly spending. You might have to decide if you are going to eat Ramen for 3 months or put the unexpected expense on a credit card.
We invite you to the magic of squirrel funds! These precious little funds provide you with funds when you need them while you store money (nuts) away in them on a regular basis.
If this sounds somewhat familiar we covered “how to hide money from yourself” in a different post. Today we are going to take it to the extreme and outline in even greater detail how to make this system work for you.
Why Should I Have Squirrel Piles Can’t I Just Have One Backup Fund for All Expenses
This is a common question we get when someone finds out about our squirrel pile methodology. Squirrel piles help with more than just unplanned expenses. They empower you to have money when you need it for items that you might not think about on a daily basis.
When you have all of your money in one account you might not be saving enough for say car repairs or you might not realize you have money set aside for clothes as it’s blended together with your pet emergency fund.
This methodology is designed to provide you freedom to spend money not to leave you a prisoner of a bucket of money in reserve that you can’t touch as you fear you won’t have enough to help with expenses should you or a loved one lose a job.
Decide How Many Squirrel Funds You are Going to Have
Now that we have you on board with the squirrel pile methodology let’s start breaking it down.
Step one in the new world of setting up your squirrel piles is to decide how many you are going to have. Let’s look at squirrel funds that we have either had ourselves or that we have encouraged others to adopt.
- Bike
- Clothes
- Car Repair
- Car Mods
- Fun Money
- Out of Work or Reduced Hours
- Gift Fund
- Medical Bills
- Appliance Repair or New Appliance
- Backyard Furniture
- Golf Clubs
- Pet Care
- Car Insurance
Looking at this list you might be thinking “wow these two have totally lost it” or “this sounds insane”. We understand this might not be for everyone however what this method provides is having funds when you need them for expenses that you might not have planned for in advance. It’s especially helpful for unexpected expenses that happen on an infrequent basis.
Before going to the next step look at the list above one more time and select 2 or 3 that you might have encountered in the last 12 months where you had to either dig into an emergency fund or put onto a credit card.
Allocating Funds To Your Squirrel Accounts…You Are Now Like a Squirrel Always Preparing For Winter
Part of the magic of the squirrel accounts is that you are perpetually putting nuts away for winter. This might seem crazy however if you can stay with us for just a little bit longer we promise this will make sense.
Let’s look at how you might allocate funds to these accounts.
| Squirrel Fund | Monthly Amount | Year One Squirrel Fund | Year Two Squirrel Fund |
| Gift | $25 | $300 | $600 |
| Car Repair | $35 | $420 | $840 |
| Appliances | $20 | $240 | $480 |
| Pet Care | $12 | $144 | $288 |
| Furniture | $25 | $300 | $600 |
Another beauty of the squirrel account allocation system is it’s made up of smaller amounts of money on a monthly basis. Each contribution is about the same amount as one would spend on eating lunch for two or a week’s worth of Starbucks (we promise we love Starbucks and we don’t pick on them).
Over time these smaller amounts of money really add up. In the chart above you can see that after two years you start to amass larger amounts of funds that can really help you tackle larger purchases with much greater ease.
There are online banks that allow you to accomplish this kind of saving set-up quite easily. One of the banks that we have used to do this is SoFi where they have a feature called “Vaults” and you can set-up all sorts of squirrel accounts. Who knows maybe one day a bank will set up a feature called “squirrel accounts”
