Save for your Winter Heating Costs all Year Long without Temptation

When the winter comes along, homeowners in most parts of the country feel their wallets get lighter. For example, I predict that I will use about 500 gallons of kerosene to heat my house this winter. At $2.80, that's $1400! Unlike working with a utility company to get a budget plan where they estimate your average monthly utility expenses and charge you that, I have to save up before hand in order to pay the delivery man when he comes to fill up my tank. And with a 100 gallon minimum, the smallest charge I'll have is around $300. Yikes.

The other issue most people have is the temptation of spending that $1k they have had sitting in their bank account all year.  As the balance grows, so does the desire. The same problem happens when a homeowner doesn't have a tax escrow for property taxes, they must be disciplined enough to save for property taxes. One product banks offer is a tax savings account to save all year and only withdraw when presented with a tax bill. We'll use the same principle with saving for heating costs: a "holiday savings club" account.

Obviously a holiday club or holiday savings account is normally used to save all year long for your year end consumerism. Most credit unions offer them and a few banks do as well. What happens is you make deposits year round and then in October or November, the bank will transfer the entire balance to your regular savings or checking account, earning you a little interest in the process. Most holiday savings accounts have restrictions on how many withdrawals can be made during the year and some will even close your account it you make more than one early withdrawal. While its possible to blow your heat savings on a new car, by making it more difficult to access the funds (some require you visit the branch for an early withdrawal) you reduce your temptation. And if a major emergency does occur, the funds will be available. Setup direct deposit or an automatic transfer and you should be all set for Jack Frost nipping at your nose. Use a summer savings account or a vacation club savings account if you live in a warmer climate and need to cool down in the summer.

Another alternative would be to open an online high-yield savings account and setup direct deposit or automatic transfer. Being separate from your regular bank should keep your eyes off the money while earning 1%. ING Direct and HSBC Advance are the largest. I have HSBC and I am unsatisfied with their customer service but like the fact that by having a regular checking account with them I can carry out transactions at my local branch.  You could really keep your hands off the money by getting an X month CD depending on the time remaining until the winter. However, nowadays most CDs wouldn't earn much more interest than a savings account and most earn less than 1% of such small amounts and short time periods.

Whatever you choose, the most important thing is to have discipline. This is not meant to be investment or tax advice and you should consult with a financial professional before taking any course of action.

Let me know if you have any tips for fueling your house with your bills. I wonder at what point it becomes more economical to burn the money for heat.