Use Automatic Transfers to Save for Annual Expenses
Many of your bills can be paid annually, whether it’s your renters/homeowners insurance or your property taxes, or your trash collection fee or something else; some of those services will give you a discount if you pay them in a lump sum rather than over every month or quarter or six months. For example, my homeowners association fee will bill me every year and give me a 5% discount if I pay in one lump sum rather than two half-year payments. In some cases, the recipient is hoping to earn a little extra interest in your money but oftentimes they are simply looking to reduce their administrative overhead. Either way, you can save money simply by saving up the funds to make one lump sum payment.
The easiest way to do this is to set up recurring monthly transfers from your main checking account, where your income is deposited, to a savings account you have earmarked for this purpose. It’s simple to open up additional accounts at ING Direct, you could even name it “Annual HOA fee” and simply transfers $50 each month (in our case), then transfer that out whenever payment needs to be made.
If it’s not as important for you to have separately named accounts, I recommend FNBO Direct instead as it has a higher interest rate at 3.50% APY.