I have a friend who clips coupons religiously. He saves a good amount of money on his groceries, but then turns around and spends all of that money he’s saved on video games. I certainly don’t fault him for trying to save money, but we’ve had a couple of conversations about how he’d like to save a little more money. Sometimes my friend doesn’t really know where the money he’s saved on his groceries has gone — he has to be reminded of his video game purchases.

The problem, I think, is that most of us want to save money. But we aren’t sure of what we’re saving money for: we may have some general goals but that might be it. I’ve run into this problem particularly often with saving for my emergency fund. I know that I need cash in case something happens — if only to avoid putting something like car repairs on my credit card. I have a really hard time picturing my emergency fund as a goal, though: I often think that it would be fine to spend money that I really ought to save, because I can always put more money in the emergency fund later. That isn’t the case, of course. It’s always easier to save now, rather than later.

It’s much easier to save for other goals. There are plenty of ways to remind yourself of a goal — if you’re saving for a down payment on a house, you could carry a picture of your dream house, for instance. You do have to be very clear on what your goals are, however. You need a goal to keep in mind for your savings, no matter how far out you’re looking. If you can’t picture your retirement, for instance, you’ll have a much harder time saving for it.

I’ve also found that it’s easier to save if you can watch your savings grow. If you pile all your savings into one account — emergency fund, house, vacation — you will have to keep close track to know how much you have saved towards a particular goal at any time. Some banks offer their customers the ability create multiple savings accounts for free — or at least the appearance of multiple accounts — to help you tell the difference between the money saved for a new car and that saved for emergencies. I use this method with my ING Direct savings accounts, and it’s definitely made a difference in the way I save money.

Popularity: 12% [?]