Background: Frustrated with the banking system, low interest rates, and wanting to put my money where my mouth is, I joined a credit union. I opened a savings (required for membership, minimum balance $5, 0.3% interest rate) and a money market account (minimum balance $1,000, 0.5% interest rate up to $20,000; 0.85% over that amount). I know I can get better interest rates with a CD; I want to have penalty-free access to this money.
I deposited my latest paycheck (just over $1,000) in the money market account and about $30 in the savings. I don't have an ATM card, and the branch is sufficiently far that I would need a good reason to go withdraw. But I do have deposit slips and envelopes to deposit checks by mail. So this money market account is my emergency fund*. I can contribute easily, but not withdraw easily. (BofA, by the way, is the opposite. Ever notice how easy it is to get money out of an ATM? It takes at least twice as long to make a deposit.)
*I don't really think I need an emergency fund. I mean, yes, everyone needs an emergency fund, but I have savings that acts as my emergency fund. I don't live paycheck-to-paycheck, and I don't spend money unless I need to. So I already have a decent buffer. But this is an exercise in saving, and the rules of an emergency fund apply.
I live off my BofA savings and checking accounts, but I also have (no-risk, low interest) CDs with them, money that has accumulated through past savings. Whenever my savings & checking accounts get too big, I buy a CD. Only this time, I'm mad at BofA, so I'm contributing the excess to my credit union money market account.
Goal: Save at least $10,000 in my money market account without needing to crack into my BofA CDs. Siphon off paychecks when I don't need the cash, deposit them into my money market account instead.
I'm depositing $5,000 today, off an unusually big paycheck. I hope to save the rest ($4,000) by sometime in the summer. This will mean siphoning 2 to 3 regular-sized paychecks.
Reward: Once I've saved that $10,000, THEN I can start saving for a new computer. I plan to get an iMac. (This saving shouldn't take too long.) At that point, I'll transfer $10,000 from my no-risk CD into my money market and start raking in the interest*. And maybe I'll set a new goal.
*That's a joke. At 0.85% interest, my $20K would earn a whopping $170/year.