How to Automate Your Savings

We all wish there was an “easy button” when it comes to saving. While we don’t have that (at least, not yet!), we do have the next best thing: automation. Automating your savings takes the guesswork out of whether and how much to save. We only have so much time, attention, and focus. If you wait until the end of the month to see if you have anything left to save, there is a good chance you don’t. By automating your savings, you’ve already made the decision of how much to save and implemented a system to do it for you. 

How can you automate your savings?

There are multiple ways to implement automated savings. Depending on your financial institutions (and your employer’s payroll provider), one might work better for you than another.

Split your direct deposit

Many payroll systems allow you to direct your paycheck into multiple accounts. Depending on the system, you can direct how much money you want to go into each account by dollar amount or percentage. Either way, once you split your direct deposit, you never even see that money hit your checking account—out of sight, out of mind, right?

Set up a recurring transfer from checking to savings

Alternatively, you can set up a recurring transfer from your checking account to savings. Here are the steps:

  1. Link your bank accounts. If your checking and savings accounts are at different banks (because, say, you followed our advice and set up a high yield savings account), start by linking the two banks online. This can be done through either bank. If your checking and savings are at the same bank, you can skip this step.

  2. Choose your preferred transfer frequency and transfer date. Depending on your bank, you may have the following frequency options:

    • Weekly

    • Every 2 weeks

    • Monthly

    • Quartley

    • Every 15 days

    • First business day of the month

    • Last business day of the month

    • Twice per year

    • Annually

Because your banks may have different frequency options, make sure to check both if you are looking for something specific. You can also set up multiple recurring transfers if that works better. For example, if you are paid on the 1st and the 15th, you can set up two separate monthly recurring transfers for each of those dates. 

  1. Set your transfer amount. This can be any amount you choose, but ideally, it’s an amount you came up with by looking closely at your budget and spending.

Use an automated savings app

If you are looking for a more flexible or fun way to automate your savings, check out automated savings apps like Opportun (formerly Digit) or Qapital. The main benefit that they have over saving through direct deposit or recurring transfers is that they link to your bank accounts, learn your spending habits, and squirrel away small amounts of money that you don’t need. This can be a great option if you are just starting to save and aren’t very comfortable picking an amount. The downside is that these apps charge monthly fees, so they will cost you rather than pay you like a high yield savings account does. 

What issues might you face with automating your savings?

While automation has amazing benefits, there are a few aspects of it that could trip you up:

Your automated savings doesn’t line up with your pay schedule and bills

If you don’t have a big cushion in your checking account, making sure that your savings won’t interfere with paying your bills is key. For example, you might initially think to automate $250 into savings every time you get paid, but most of your bills are paid with the first paycheck of the month, and so you end up with very little money for groceries and other expenses until you get your second paycheck. In this case, you could create a better overall balance in your budget by saving $500 once per month from your second paycheck.

Make adjustments when your budget changes

Life changes all the time and your budget should too. If you, for example, start going to therapy or add in a new subscription, you’ll have less money available for day-to-day spending unless you reduce your automatic savings.

Ready to get help with your finances? 

To get started, schedule a free 20-minute consultation call to speak to a member of our team. We will ask you a few basic questions to get to know you more, walk you through our financial training program steps, and answer any questions you may have. No pressure to join! Need advice quickly? Talk to one of our Trainers on Demand.

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