In an earlier article I talked about how to set up your checking accounts to put your financial life on auto pilot. One of the things I do is automatically have my savings taken out of one of my checking accounts that I put all my monthly fixed expenses. I make my savings become a fixed expense just like my utility bills or mortgage. I pay myself first which is a method that I'm sure you have heard a hundred times. By doing this all automatically it becomes less painful and gets "lost" in all the other expenses. This getting "lost" is good because you tend to forget that you are saving this money.
What should you do with this money. Well just don't let it sit there. Have it moved, of course, automatically to a good savings vehicle. I use INGdirect for my emergency funds and Schwab for my investments. I have these companies automatically move the amount I have identified as savings to my accounts at these sites. The INGdirect.com is a traditional savings account but with a higher interest rate than you will find at your bank or credit union. With the money going to Schwab I have that invested in a mutual fund for my kid's college funds. You don't need a lot of money to get started at either of these sites. Getting started with either is easy.
Again, set this all up automatically and it is just easier. Before you know it you have a nice stash.
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