What Is Bucketing?

Written By Elizabeth Schroeter
Last updated February 10, 2021

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Investing
February 8, 2021

Simple. Thrifty. Living.

When it comes to finding ways of saving money, you’ve probably seen a lot of options. Whether it be from advice given by friends and family, to apps that are designed to help you meet saving goals. But have you heard of bucketing? This method of saving can be particularly effective in helping you meet saving goals and provides you with several options for doing it.

Essentially, bucketing is a saving strategy in which you place specific amounts of money in a variety of separate accounts. This not only helps you save money but also helps you save for particular purposes. For example, one account could be for the purpose of purchasing a new car or going on a vacation, while another account could simply to save for an emergency fund or retirement.

In this manner, the bucketing method helps you meet saving goals for both the short-term and long-term.

How you choose to engage in bucketing depends on your saving goals. For saving for short-term goals, options such as a money market account or a high-yield savings account might be suitable. Of course, you can always simply put money away in envelopes or in a regular bank account, but doing so can make it tempting to access the money for other purposes, interfering with your saving progress.

Charting Progress

If you have several saving goals, it might also help to keep a chart of your progress, noting the amount you put into each “bucket” at specific intervals. Then, if you need to, you can also adjust what you put into each bucket if you want to meet one goal sooner than another.

Short Term Versus Long Term Goals

For saving goals that will take longer but aren’t necessarily what you’d consider long-term, you could also use a few high-yield savings accounts for bucketing, and it will also help to track your progress. Doing so encourages you to continue to strive to meet your saving goal. For example, you might set up bucketing accounts for college tuition for your children. A Certificate of Deposit (CD) might be more suitable for these longer saving goals. The term length of the CD will offer different rates of return, so consider that before you use them for bucketing.

When bucketing for long term saving goals, such as retirement, a typical option is to put the money into an IRA or another type of retirement account.




In order for the bucketing method to be successful, you will need to ensure that you continue to add to your buckets on a regular basis. It can be a good habit to get into the practice of taking a specific amount of money from your paycheck to put towards bucketing. It might be possible to have certain amounts automatically deducted and put into other accounts — check with your bank for this option.

Stick with it, and you’ll see your buckets filling up, and as you meet each saving goal, you can contribute more money to other buckets, helping you fill them up faster.

About the Author

Elizabeth Schroeter

Elizabeth Schroeter is the co-founder of Simple Thrifty Living. Elizabeth earned her BA in psychology from San Francisco State University, later going on to earn her doctorate in clinical psychology. Not only does Elizabeth draw on her educational background, she also incorporates her real life experience as a mother of 4 year old twin boys. As a parent she understands the need for accessible quality content, especially when it comes to finance and parenting. Elizabeth resides in San Francisco, California with her family.

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