Save Money Automatically
By February 1, 2022 Money management
What’s the Easiest Way to Save?
The easiest and most effective way to save is automatically. This is how millions of employees save through 401(k) and other retirement programs at work. If you’re intimidated, start small.
How to Save Automatically
- Automatic savings means you have a process in place to save at regular intervals, whether that’s monthly, weekly, or daily. Ask your employer to direct a certain amount from your paycheck each pay period and transfer it to a retirement or savings account (or both). Traditionally, you can set this up using your employer’s direct deposit, ask your HR representative for more details and set this up today.
- Every payday, you can ask your financial institution to transfer a fixed amount from your checking account to a savings or investment account.
- Choose a day of the month or a regular interval, such as every 2 weeks, to transfer a set amount from your checking account to a savings vehicle. We particularly recommend this method for people with inconsistent income or those who access their pay frequently. Consider picking a lower dollar amount or a time of the month when many other automatic payments aren’t happening.
- Use direct deposit at work to split your paycheck into a checking and a savings account. Automating retirement savings is a great way to assure that you receive any matches or employer contributions as well.
- Use direct deposit at tax time to put your refund directly into savings. A federal tax refund is the most money many households receive all year. Make your refund an opportunity to add to your savings and reduce your debt.
Why Automatic Savings Works
Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years. Soon you will be able to cover many unexpected expenses without putting them on your credit card or taking out a high-cost loan.
You can start with only a small amount, and you can save daily, weekly, or monthly. Over time, your deposits will add up. Even small amounts of savings can help you in the future.
Fun Fact: Did you know? Adoption and awareness of direct deposit continues to build among consumers. According to an America Saves survey 82% of U.S. workers are paid via Direct Deposit, up from 74% in 2011.
That's good news, because setting up automatic savings is the easiest and most effective way to save.