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Sub-savings accounts: How to save for tough times in 3 steps

Sub-savings accounts are the best way to save for any financial goal. Here I show you my exact system for how to make your own and start earning today.

Ramit Sethi

Here’s a system that can help you prepare for even the worst emergencies WHILE allowing you to save for awesome purchases in the future:

Sub-savings accounts are fantastic for setting concrete savings goals for any purchase you might want to make in the future.

I’m talking about big purchases like weddings, engagement rings, homes, and even emergencies.

Now I put away $150 / month in a sub-savings account for unexpected expenses like this one.

Let’s break down what it is, where you can get one, and how you can set one up today.

If you’re worried about your personal finances, I have a simple step-by-step system you can follow to put you at ease. Check out my Ultimate Guide to Personal Finance for tips you can implement TODAY.

What is a sub-savings account?

piggy bank savings

A sub-savings account is an account you create to save for specific purchases or events.

Using my automated personal finance system, I use monthly automatic transfers to funnel money into each of my sub-accounts. Now that these transfers are in place, I’m getting closer to each of my goals automatically, month after month, without having to remember to set money aside.

This is precisely how people accomplish financial goals passively. Because when you don’t see the money — when it’s automatically withdrawn from your checking account and shunted to specific savings goals — you will never miss it. However, a few months later, you’ll be amazed at how quickly you’re progressing to your targets.

How to set up a sub-savings account

You need to first have a regular savings account that allows you to set up sub-savings if you want to set up your own.

If you already have a savings account, chances are your bank already does this. If this is the case, head to step two.

If you don’t have a savings account that allows sub-savings (or if you don’t have one at all), that’s okay! You simply need to open one up.

Here are a few great suggestions for banks that offer great savings accounts (with sub-savings):

I use Capital One 360 (formerly ING Direct). I praised this bank account in my New York Times best-selling book I Will Teach You To Be Rich over 10 years ago and I STILL use the same account now.

A few fast facts about the Capital One 360 savings account:

  • No fees
  • No minimums
  • High-yield interest rate at 1% APY
  • Links to your checking account (even if not in ING) via electronic transfer

Which savings account you choose doesn’t matter as much as just getting started. So don’t spend too much time deciding which one to go with. They’re all great.

Once you have your savings account set up, it’s time to start saving with your sub-account.

Bonus: Having more than one stream of income can help you through tough economic times . Learn how to start earning money on the side with my FREE Ultimate Guide to Making Money

Step 1: Set a sub-savings account savings goal

This is the fun part — you need to come up with goals for your sub-savings account.

You’ll have something concrete to work towards when you create goals — that way you’re not just throwing money mindlessly into a large savings account.

When I first discovered sub-savings accounts, I created one and named it “Down Payment” for a down payment on a house. I was regularly transferring money into it based on my savings goals using my automated finances.

As the months passed, and the amount in that account grew, I felt really proud of my accomplishment.

During this time, one of my friends was just blindly putting away money in an account he had mentally earmarked for vague goals.

Though we might have had the same amount saved away, the difference between us psychologically was staggering. Where he felt despair about trying to save money, I was motivated.

For me, I wasn’t working towards $20,000 for a down payment. I was working on saving $333 a month over five years — a perfectly achievable goal, especially after I tracked my progress.

Eventually, my friend did open up his own sub-savings account. He told me that doing so changed his entire perspective on saving money for the better.

So think of things YOU want to save for.

Here are a few suggestions:

  • Wedding / engagement ring
  • Down payment on home
  • New car
  • Emergency payments (car breaks down, surprise medical expenses, etc.)
  • Travel / vacations

Once you have a goal in mind, it’s time to get really specific with it — and you can do that with SMART Objectives.

SMART stands for specific, measurable, attainable, relevant, and time-oriented.

A good goal will exemplify all those things.

Check out these examples of how normal goals compare to SMART Objectives:

BAD GOAL: I want a house.

SMART OBJECTIVE: I will put $XXX dollars into a sub-savings account each month until I have enough for a down payment on a house.

BAD GOAL: I want to travel.

SMART OBJECTIVE: I will read Ramit’s article on how to travel cheaply, pick a destination, price it out, and learn how I can travel on a budget this July.

So think:

  • Is there something you’re saving for?
  • When do you want it by?
  • How much can you save each month?
  • How will you know you’re on the right track?

Saving with a goal in mind puts all your decisions in focus.

Step 2: Create the sub-savings account

Now it’s time to actually create the account.

Though the exact steps will vary from bank to bank, the process is essentially the same for each savings account: Go to your bank’s website, log in to your account, and create a new sub-savings account.

Chances are your bank will even allow you to give the account a nickname. This lets your sub-savings accounts reflect your savings goals, like I did with my down payment.

Check out all the different sub-savings accounts I had in my old savings account.

Ramit's Sub-Savings Accounts
ING Direct is now Capital One 360. BTW that wedding one is going to be put to good use.

Here’s a look at a few sub-savings accounts I have now:

Ramit's New Sub-Savings Accounts
ING switched to Capital One 360, and I used the money I saved to buy an engagement ring.

Step 3: Automate your sub-savings account

Once you have your sub-savings accounts open, it’s time to automate the entire system.

Automated finances are the ultimate cure to never knowing how much you have in your checking account and how much you can spend.

When you receive your paycheck, your money is funneled to exactly where it needs to go — whether that be your utilities, rent, Roth IRA, 401k, or your savings account.

How To Automate Your Finances Infographic

Check out my video below to learn exactly how to set it up today.

Earn money for your sub-savings account

I suggest putting around 5% of your income into your sub-savings account each month. Though this amount seems small, you’re going to be surprised at how easily it will add up over time.

The best way to make that 5% even bigger is by earning more.

I’ve said it once and I’ll say it a thousand more times: There’s a limit to how much you can save but no limit to how much you can earn.

That’s why my team and I have worked hard to create a guide to help you earn more today:

The Ultimate Guide to Making Money

In it, I’ve included my best strategies to:

  • Create multiple income streams so you always have a consistent source of revenue.
  • Start your own business and escape the 9-to-5 for good.
  • Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start blowing up your net worth today.

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  1. avatar

    Hey Ramit, new reader, but I really like this tip. Especially the stupid mistakes category!

  2. avatar
    Steve Kinney

    Nassim Taleb, author of the Black Swan, has a similar tactic. Granted, he’s certifiably rich: He puts aside $2000 at the beginning of each year to cover Black Swans (unexpected events and stupid mistakes). At the end of the year, if there is any money left, he donates it. The end result is that he doesn’t really stress out when something bad happens, because that money is gone anyway.

    I do a similar thing for my dog. I know that hideously expensive vet bill is coming down the pike. Maybe not today, maybe not this month, but it’s coming. So I have a sub-account with ING Direct that I funnel $25 to every paycheck.

    My philosophy is this: You either save beforehand and put money aside for these kinds of events. Or you save after the fact as you put money aside to pay off the charge you made to your credit card.

    Another suggestions I have, is to start a sub-account for a new laptop or computer. It’s only a matter of time before your computer dies. Rather than have to unexpectedly plop down another $1000 when that happens (or put it on my credit card and pay it off—as it accrues interest) over the next year. I prefer to pay in advance and let it accrue interest on my behalf, instead.

    The one psychological barrier I’ve found, is that it’s a lot easier to raid your laptop savings than it is your pet’s emergency fund.

  3. avatar
    kevin from minneapolis

    Does creating all those accounts affect the amount of interest you earn?

  4. avatar

    You can create sub accounts using SmartyPig ( I signed up several months ago before opening up an Orange Savings account with ING. The benefit of SmartyPig is that other SmartyPig members (preferably your friends and family) can share their savings goals which helps people to stay motivated. When you are being watched, you are more likely to do the right thing…in this case, save your money. The sub accounts you create are towards financial goals. Money can be transfered between your main account and your SP account. Once a goal is reached, you can also elect for a gift card (extra 5% back too! 🙂 ). I think I will stick with just transferring my balance back into my savings/checking account when my goal is reached.

  5. avatar


    In my humble opinion, you are confusing people by insisting to call the “New Account” a “sub-account”. Let me explain why I think so, by asking a few questions.

    1. In what sense is the new account subordinate to the original account? Do they share the same account number? NO.

    2. Will closing the original account automatically close the “sub-account”? NO.

    3. If you add money to the “sub-account”, does the balance in the original account increase? NO.

    I think you can get away with calling them sub-accounts, because the interest rate you earn is the same in the “sub-account” as in the original account. Since that is the case, it makes sense to have multiple accounts to help organize your finances…

    BUT, I do wish it was possible to have TRUE “sub-accounts” with ING. I wrote about it at another blog earlier, here is my explanation of why true “sub-accounts” would be great:

    Now that ING is offering Tax Free Savings Account, it would REALLY be great if we could truly have “sub-accounts”.

    Think about it. The way things are today, you can have only one (1) TFSA account. But, we all realize the benefit of having more than 1 savings account; it makes it easer of us to ‘categorize’ our savings. So, if you are like me, you have one TFSA account, and multiple other “non-tax-free” savings accounts. BUT, this way I”m only earning tax free interest on the money in TFSA, not my other savings. This is not what I want!

    It would be GREAT, if all my savings could be in TFSA, just in different “sub-accounts” of my main TFSA account. This way, ALL of my savings would be earning tax free interest.

    just my 2 cents,


  6. avatar

    EmigrantDirect also allows subaccounts.

  7. avatar

    HSBC online savings allows you to quickly create new online savings accounts. You aren’t restricted to just one account. Then you can manage all your accounts online and give them nicknames. Not quite as convenient as ING, but HSBC has higher rates of return and this small inconvenience is well worth that IMO. Nevertheless, it is possible to do sub accounts with HSBC like ING.

  8. avatar
    GoEverywhere Team

    As one who doesn’t always do really well with staying on top of all of my financial plates that are spinning, I find this a really good idea to avoid those depressing days when the giant bills come crashing down.

    I don’t have an ING account but am pretty sure I can implement the same sort of thing with my current online banking system.

    Thanks for a solid tip…and I don’t think many of us are too confused.

  9. avatar

    Hey Ramit
    Read the first chapter to the book online and ordered it on amazon. Great stuff. Looking for the spreadsheets to get my credit in order. Anyone know where these are for download? Cannot find on the site.

  10. avatar
    Chris K

    Oh, it’s not Vonnegut, it’s Mary Schmich, Chicago newspaper columnist.

    That said, I have HSBC, but am too lazy to do new/sub accounts…

  11. avatar

    [email protected] stupid mistakes account.

    As hectic as life is, we would probably all have several account, especially for people with kids

    Vacation and emergencies are the main accounts we have, so I guess my sub-accts all fall under one big umbrella.

    I’m not as meticulous. However, everyone is different when it comes to saving. The main thing…. we are saving!

  12. avatar

    So….this is an emergency fund that you clean out every year?

  13. avatar
    Irina I

    Last week, my iPhone got stolen and since my AT&T upgrade is not coming up anytime soon, I would need to pay $500 to get a new one. I was really pissed for a couple of days…especially since this would definitely set me back on my saving.

    And then a friend suggested creating a “Bad Stuff Happens” budget annually and setting aside a sum of money for that. Then I won’t feel so pissed off and powerless about this.

    I like that your post iterated that.

  14. avatar

    ING Direct is down to 1.5 percent on the Orange Savings accounts. Is it time to pull our money out?

    Is it a good trade off to have your money in a Dutch bank for a 1.5% gain?

    additionally, sure they’ve already been bailed out, but isn’t a credit union (in the united states) safer?

    ING Gets a $13.4 Billion Bailout from the Dutch Government

  15. avatar
    Pishabh Badmaash

    If you were a real Indian only then you would be driving maroon colour Toyota Camry only

  16. avatar
    Ramit Sethi


  17. avatar

    Hey — Just found this site (thanks to Tim Ferriss) and here’s the question: as someone who is 44 — and soon to be 45 — do your ideas still work for me, or do I need to develop a more aggressive strategy given that I have fewer earning years left?

  18. avatar

    I don’t want to speak for Ramit but the basis of most of what Ramit says is based on intelligent and conscious spending and taking control of your finances.
    That means optimizing your spending (like re-negociating your car insurance premium that you will pay anyway so why not try to get a few hundred dollars off), automating your finances (putting money aside before you can actually spend it) and more generally take a few steps to really know what’s going on rather than not doing anything because you think it’s complicated and boring.

    So, yes his ideas will still work if you’re 45 or any age. Since you’re asking, it probably means that you realize that your financial situation could be better, so you will probably have to be more aggressive by putting more aside maybe?
    But, in any case, my take on Ramit’s blog and ideas is that he wants to push people to take control. Once you’re conscious about where your money goes, the rest should fall in place: “I spend too much on restaurants”, “I don’t really need these subscriptions”, “I need to prepare for that coming big expense”…

    As a lot of good advice, it’s common sense and common sense doesn’t stop at 40.

  19. avatar

    HSBC has an Online Payment Account which is a better alternative to a standard checking account because your money earns more interest. Ramit, I really like this sub-account concept but it seems easier and more flexible to manage in Excel. This way you can plan your expenditures by category and sub-category (eg: Clothing -> Shoes) and then compare that with your actual burn rate on Mint.

  20. avatar
    Ramit Sethi

    Nick, my guess is you are probably pretty technical. If you ask the average person whether they’d use Excel to manage their sub-accounts on an online high-interest savings accounts, they’ll look at you, blink with confusion, and suddenly vomit. This is part of the 85% Solution I talk about in the book: If it gets you 85% of the way there, great — move on w/your life to more important things.

  21. avatar

    Lol! I hear you man. I just read your tip on the web site. I’m on way way to Borders right now to buy your book. I’m a Gujarati male – always looking for ways to save. =) There is definitely something to be said about simplicity. Keep up the great work Ramit!

  22. avatar

    Not everyone wants to track every little eventual expense.

    I would think the “Doe” fund, the laptop fund, the pet bill fund, the car maintenence… could all be bundled into one big account. At least this is how I execute it. In fact I have that bundled with my vacation and gift fund also.

    I am glad to see you are still a big supporter of ING, even though there are better interest rates to be had elsewhere.

    I can’t explain it either, but for some reason I’m willing to accept their slightly lower interest rate (HSBC is advertising 1.85, ING 1.5).

    I DO believe that each of these sub accounts are separate, they show a different account number in my ING Direct page.

  23. avatar
    Nicholas MacDonald


    ING Direct is fully FDIC insured, so, regardless of nationality of the owners, there’s no risk if your savings are lower than $100,000.

    That, and it’s not really an offshore bank; ING Direct USA is a subsidiary incorporated in the US, meaning it’s functionally an American financial institution.

  24. avatar

    I love the idea of a slush fund, rainy day account for the stupid things in life that just happen. Call it the “Murphy’s Law” account. It is inevitable that you will need it. How about this – what if you just set aside 5% of the price of every major purchase that you make into this fund? It would be far better than buying warranties and such.

  25. avatar

    I’ve stuck with ING despite the 1.5% interest rate mainly because they don’t charge ridiculous fees. Ramit talks about this at the beginning of chapter 2 of his book.

  26. avatar
    Michael Kogelman

    Financial planning aside — what state are you in that charges $165 to register a freakin’ car! — I’m in NJ, supposedly one of the highest taxed states in the country and I pay $43/year to register each vehicle. That’s just absurd, and a late fee that rivals doubling the initial cost? W.T.F.?

  27. avatar

    @Michael Kogelman

    Welcome to California 🙂

  28. avatar

    Good Tips Ramit, I am a big sub-account supporter.

    I would caution users of Money Market accounts in general (including ING Direct), that out-going money transfers are typically limited to 6 per month (and if you go over this for 3 months out of a given 12 month period, ING Direct reserves the right to close your account).

    This includes transfers between sub-accounts (say, ‘General Savings’ to ‘House Down Payment’) and all out-going transfers (any sub account to a brick-and-mortar checking account).

    Happy Saving!

  29. avatar
    Moneydancing, part 2 | The Muse

    […] amount accordingly. This prepares us for price increases at the pump. I borrowed that idea from Ramit Sethi.) Powered by Stumble! for […]

  30. avatar


    This is a very interesting way of doing finances. I could see where someone like myself could take advantage of this as I am very much of the compartmental brain type.

    However, I know at one time they had competitive interest rates but now they are very low. Much like those you would get at a local bank. Is the ability to have “sub-accounts” enough to override the fact that they pay 50-75% less than other online institions. An example would be Flagstar Bank.

  31. avatar

    Hi Ramit! I’m a new follower of your blog and I just ordered the book. I just had a quick question for you; I already had a account but I’m having trouble adding my ING information. Has anyone else experinced a problem adding them to their mint account? I’ve tried several times, but it looks like I’ll have seek further help from either mint or ING to get the problem solved.

    Thanks for all of your great advice Ramit!

  32. avatar

    I called ING and they said that they do not support Mint, so you have to add your ING accounts to Mint as an “asset”, which does not automatically update. If anyone has ways around this problem, I would be eager to hear.

  33. avatar
    How to Supercharge Your Savings « Beyond Beer Money

    […] a hassle than it is worthwhile.  (For a good example of mini – savings funds gone wild, check out While I normally love Ravit’s blog, he’s gotten carried away here.) My advice: Open a savings […]

  34. avatar
    Laura @ BeyondBeerMoney

    While I like the idea of sub accounts, I worry sometimes finance gurus spend their spare time brainstorming outrageous new “must have” savings funds the average American (having a vacation fund is one thing but having a separate savings account for unexpected pet exepenses? For each pet? Come on.)

    For me, it all just seems more of a hassle than it is worthwhile.

    While I normally love your blog, Ramit, I’d offer simpler advice.

    My advice: Open a savings account and write a list of clear definitions about what it can be used for (Unexpected car maintenance? Yes. Unexpected bar tab? No.).

  35. avatar

    I just opened five sub-savings accounts and set up automatic deposits for all of them and it took seven minutes, so I don’t see it as any particular hassle.

  36. avatar
    What I’m Reading 4.25.09 | A Merry Life

    […] One thing I’ve read about and actually done is making saving automatic.  Once I get paid it goes into my ING Direct account and then I split that off into sub accounts like my travel fund and house down payment fund.  I read about this little tactic on I Will Teach You To Be Reach. […]

  37. avatar

    Have you guys been clicking the ING savings account link he posted up there? It’s an affiliate link.. The guy’s making money everytime you use his link to sign up at ING.

    So much for credibility…

  38. avatar
    Ramit Sethi

    T, I’ve always been open about that. Btw, note that that ING link doesn’t generate any revenue for me, any more — ING has removed its affiliate program for savings accounts.

  39. avatar


    while some part of me doesn’t like affiliate links (not sure why, probably because it’s not always clear it’s one), I don’t see why this would be a problem: Ramit is not taking money from you if you sign up with the link, instead ING Direct pays him what is basically a commission.
    If he recommends a book and links to Amazon (which he does now and then) with an affiliate link, I think it’s perfectly normal for him to get a cut: he brings in customers from his review. Yes, Ramit is probably making a nice sum from these affiliate links (though probably not to live on, but at least enough to pay for lattes 🙂 ), but it’s from his readers that he got from a lot of work on his blog.
    If one end up opening an account with ING after reading this, why not?


  40. avatar

    Yeah, I noticed the affiliate link as well. Have to admit I was a little disappointed by it.


    I think you’re missing T’s point. Yes, the money doesn’t get taken from those who click on the affiliate link, but given that there’s an added motive (or at least there WAS one when Ramit was earning commission) for promoting ING Savings Accounts, don’t you find it a bit hard to trust him 100% on this particular topic?

    Ramit, no hard feelings here. I still love your book, but I hope you understand why the affiliate link makes some of us think twice about your advice on opening an ING Direct account.


  41. avatar
    Nick N. Oza

    As always, lovin’ the site, lovin’ the advice.

    Just a kind FYI…the quote at the top regarding being blindsided on at Tuesday isn’t actually Kurt Vonnegut. Its Mary Schmich…later made popular by Baz Luhrmann.

  42. avatar

    how to invest gold/silver?

  43. avatar

    how to invest gold/silver?

  44. avatar
    Targeted Savings Accounts for Freelancers « Light Cue 23

    […] From reading all this you might think I have 20+ savings accounts with various banks. In fact I have two. One is my primary account from which I pay myself a monthly salary. The other is with an online bank that allows me to create as many “sub-accounts” as I want. A good, and deeply sarcastic, explanation of this sub-account system can be found here. […]

  45. avatar
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    […] vacation — to start chipping away at. Each month, I direct a specific amount of money into three sub-savings accounts, one for each purchase. The amount depends on my time horizon, and I treat this money as a fixed […]

  46. avatar

    Capital One now has a money market account that pays 1.4% a year for balances of 10K or more.

  47. avatar

    Guys, is there anyone who could share with me banks offering good savings accounts in the UK?