It is important to have several different types of savings so your money has a “name” on it. Clearly defined goals will make it easier for you to make financial progress.
First off, you must have an Emergency Savings to smooth out life and keep the stress down. 3-6 months is standard. But if only one spouse works or your job is unstable, 6-12 months is better. This account is only to be used for emergencies. A huge discount on those Hawaii plane tickets doesn't qualify as an emergency! Emergencies are things like job loss and major health issues.
Next, you need savings for Unplanned & Irregular Expenses. These are those things that don't occur every month. Unplanned expenses includes car maintenance, doctor visits, etc (you don't know when the expenses will occur, or how much they'll cost). Irregular expenses include semi-annual insurance bills, car registration, etc. (you know the bill amount, but it isn't paid monthly). Even though these expenses aren’t paid every month, you can save for them each month by putting money in a separate savings account reserved for paying those expenses when they arise.
Then you should also have savings for different Goals like vacations, dining out, replacement cars and home upgrades. All of your impulse expenses should fall into this category. Save for them monthly, and the large amounts won't steal from your "Emergency Savings".
Lastly, you should have savings for Retirement. This could be 401k or IRA money. It could be Pension Plan contributions or savings for future Rental Property purchases. Anything that doesn't make you reliant upon social security!!
We are big believers in the use of multiple savings accounts. Contact us if we can help answer any questions on how to apply this to your specific Budget/Spending Plan...we’re here to help!