How strong is your piggy bank?

Some savings accounts are easy to get into. Others take more work — a lot more work. How easy is it for you to dip into your piggy bank?

(This article was originally written on February 8th, 2008.)

Did you have a piggy bank when you were younger? For many of us, a piggy bank was our first introduction to saving.

A saving plan is essential for long-term financial security. Just as important, though, is knowing oneself well enough to know how far out of reach those savings have to be for them to stay there until the proper time. For people that don't have spending problems, a checking account is fine. For people that do, getting some barriers in the way of that saved money makes them think twice about dipping into those funds.

You can always smash your piggy bank.  You can always get at your savings if you really, really want to. The question then becomes: How strong do you want to make your piggy bank? How hard, or how painful, do you want to make it to get at your money quickly?

What level of hardness do you want?

Level 1: Papier-mache bank

This kind of piggy bank is cash, coins, or a checking account that you use every day.

You can keep your emergency fund, retirement savings, college savings, or whatever in accounts with check-writing capability. This gives you easiest access to the money if you need it, but that's also the rub: You can rob from your future the easiest as well.

Level 2: Ceramic bank

This kind of piggy bank is an “unlinked” savings account, or an online account without check-writing.

These accounts require another step: you have to transfer the money into someplace more accessible, and that requires time. This is the method we've used over the past few years, and it helps a little, but it still is pretty easily pilfered.

Level 3: Aluminum piggy bank

This kind of piggy bank might be a certificate of deposit.

If you're far away from the CD's maturity, you'll be forfeiting interest, and possibly paying a fee, to redeem it. You can still get at the money, but it will hurt a little.

Level 4: Steel piggy bank

This kind of piggy bank might be stocks, bonds, or precious metals.

Redeeming these assets take more time, and could possibly be sold at a loss if market conditions have turned on you. There are commissions and/or spreads associated with selling these assets. These are more investments than cash holdings and should be held long-term in an ideal world.

Level 5: Cast-iron bank

Now we're getting serious. This level involves tax-advantaged accounts like IRAs, 401(k)s, or college plans.

Withdrawing from these triggers a 10% penalty plus having the distribution taxes as current income. These kinds of withdrawals hurt a lot, so they are definitely not your first choice if you need some cash.

Level 100: Titanium-reinforced Kevlar® bank inside a force field

It doesn't get any harder than this, really.

Paying down your mortgage.

This is about as far out of reach as it gets. If you put an extra $100 per month toward your mortgage, it's essentially locked up. You can get a home equity line of credit to get at the money, but there are lots of fees to set that up, plus interest on the borrowed money. It's a loan against the equity in your home, and it's very costly. Even worse, if you lose your job, you may not even be able to get a loan!

How strong do you need your piggy bank to be? If you find yourself dipping into savings a lot for this and that, you might need a stronger one.