By Amanda L. Herrick Smith, CFP®


Have the holidays ever snuck up on you and you realized your bank account just cannot sustain the impact of gift giving? Up goes the credit card balances and in comes the final squeeze of the cash flow! Year after year I continued to see this ongoing pattern and finally I told myself that I was done with the ongoing rollercoaster I was riding. I started to save now so that I had the funds I needed to purchase my friends and family their perfect gift later. I am going to share with you my little secret, which I like to call escrowing.


If you are familiar with a mortgage escrow account, it is a similar concept. You save a little every month so that the funds are available to pay large expenses, such as real estate taxes. I applied this concept to my holiday savings. I opened a separate bank account, which I call my “escrow” account and started saving $100 per month via an automatic transfer to the account. Making it mindless was exactly what I needed because life was too hectic and I knew that if I had to do something manual, it just wasn’t going to happen. After twelve months of saving $100 per month it provided me with $1,200 to use toward holiday gifts! I started to broaden this savings strategy to other annual or one-time expenses. This relieved a lot of stress and even saved me some money!


I discovered that if I pay my auto insurance in full once a year I can save hundreds of dollars. To be sure I had enough funds when my premium was due I had to calculate how much I had to save. I did this by taking the full annual premium, divided by 12 months, and rounded up to arrive at the monthly amount I had to save. Again, I set up an automatic into my escrow account every month. Once my insurance bill arrived, I had enough funds in my escrow account that I could then transfer into my bank account and pay the insurance bill. This was just too easy!


Now that I let you in on my secret, the following is a list to get you thinking where you can apply the escrow savings strategy:

  • Holiday Gifts
  • Down payment for a home, car, etc…
  • Purchase of appliances such as furnace, AC, etc…
  • Insurance, such as home, auto, AAA, umbrella, etc…
  • Estimated tax payments
  • Real estate taxes
  • Rural Heating – Propane, wood pellet, coal, etc…
  • Vacations


Starting a savings strategy such as escrowing can help to reduce stress and provide a much stronger financial position. This opens up future opportunities, which are endless.


For more information on this savings strategy or other savings tips, get in touch with one of our JGUA financial advisors at [email protected].