As money has evolved from stacks of dollar bills into an electronic ledger, it's become much easier to spend. Why is that?
Each time you receive a paycheck, it gets lumped into your checking account balance, ready to be used however you please. Therefore, your balance is constantly vulnerable to things like bill payments on auto-pay, P2P payments made to friends and, most dangerously, the times you believe to have a "cushion" for spending on wants.
Just one week later, you've already stolen from the money you planned to use for a father's day gift.
Herein lies the human need to "earmark" idle cash, or allocate it to dedicated purposes. For example, after receiving your bi-weekly paycheck, you may need to set aside funds for things like pending monthly rent, an annual tax payment or your new apartment's security deposit. But, when met with a single balance inside our banking app, we fear that our future selves will use it for spur-of-the-moment costs rather than these pre-determined needs.
So, how can you begin earmarking spare cash? Your parents may tell you about the days of performing this exact exercise using physical cash stuffed into envelopes. Another (bad) option is opening a bunch of different checking accounts.
Thankfully, today's neobanks have made the task much more efficient, with the introduction of "sub-accounts" that tend to carry the moniker of physical objects to reinforce a sense of tangibility in your earmarked funds. With these apps, you're able to stash away a specific amount from your spending balance and attach a custom label to it, empowering you to deliberately regulate its usage.
For example, with Douugh, your checking account balance can be compartmentalized into one or more "jars." SoFi's "vaults" are even more to-the-point, clearly isolating funds needed for specific purposes from your spending balance. Finally, with N26, you can move funds into one of your "spaces" by dragging from your checking account into desired space and specifying an amount to transfer. In each case, earmarked funds are safe from withdraws made against your primary checking account.
"Hiding" money from yourself using today's digital banking apps may seem silly at face value but is a powerful lever for reasserting control over your free cash and preventing pre-mature spending with it.