Put and Take vs. Put and Keep Part 3: Put and Keep Accounts

In the previous part of this blog series we discussed put and take accounts. Put and keep accounts differ from put and take accounts in many ways. There are two types of put and keep accounts. The first is similar to the frame of your house; this is the safe put and keep account. The second is like the roof of your house; the risky put and keep.

When building your financial house, we want to help you select ways to minimize wealth transfers. One of the best ways of minimizing unnecessary wealth transfers is to understand what they are and ways to minimize them.

Put and Take vs. Put and Keep Part 2: Put and Take Accounts

Are your retirement savings going to a put and take account?

At Kemp & Associates we often meet people who like to share how they’ve saved so much towards their retirement savings account¹. A recent client told us how they saved at least $1,000 a month and had been doing so for five years successfully. I did the math quickly and determined that they should have saved $60,000. When I asked where the $60,000 was currently being held, they responded somewhat sheepishly that they only had about $4,000. I questioned them politely as to how they were able to save $60,000 but only had $4,000 and they explained that they were going in and using it for different impulse purchases and bills.

This type of retirement saving isn’t truly saving. Instead, it is a form of “put and take” or, a more modern version, would be called a “delayed spending account.”

Put and Take vs. Put and Keep Part 1: The Introduction

When you build a house, you want a strong foundation.  It is the same with your finances.  You want to ensure everything is in place so your finances will stand firm and you will be protected.  There are three important pieces to the foundation of your financial house:

1.     Updated legal documents including a will, living will and durable power of attorney.

2.    A delayed spending account, called a put and take account.  This is where you're depositing and withdrawing money for day-to-day expenses and annual expenditures.  This is where you want to practice good budgeting habits and self-discipline.

3.    Appropriate insurance coverages.  Typical insurances here are homeowner's, auto, health, disability, umbrella and term life insurance.