Are you struggling to save money? Do you dip into your savings account more often than you’d like? You’re not alone. Saving money can be difficult, especially when you have competing financial priorities.
But here’s the thing: saving money is crucial for your financial well-being. Without a savings cushion, you could be putting yourself at risk for financial emergencies and excess stress.
That’s why we’ve created this guide on how to automate your savings. This blog post will explain the benefits of automating your savings, provide step-by-step instructions on how to set it up, and give you tips for maximizing your savings potential.
Keep reading to discover the tools and knowledge you need to start saving money effortlessly!
Automating savings is a simple yet effective way to save money effortlessly. As per Investopedia, automating savings means setting up automatic transfers from your bank account to your savings account at regular intervals, such as every two weeks.
This means you don’t have to remember to transfer money manually, as it is done automatically according to your instructions.
For example, say you want to save $100 every paycheck.
Automating savings can involve recurring transfers to different savings goals or investment accounts.
Automating savings saves time and effort and helps you build a consistent savings habit.
When your money is automatically transferred to your savings or investment account, you’re less likely to spend it. As a result, you can build up your savings over time.
Automating your savings has several benefits that can help you achieve your financial goals.
Here are some of the key benefits:
Now that you know the benefits of automating your savings, it’s time to learn the steps to get started.
Here are eight easy steps to help you start automating your savings:
Before automating your savings, it’s important to determine your savings goal. Consider what you’re saving for — an emergency fund, a down payment on a house, a vacation, etc.
Set a specific amount you want to save and a deadline for achieving it. This will give you a clear target to work towards and help you stay motivated.
For example, if you’re saving for a down payment on a house, determine how much you need to save and by what date. Divide the total amount by the number of months you have to save to determine how much you need to save each month.
If you’re just starting, The Consumer Financial Protection Bureau recommends checking if your bank has a minimum amount for automatic transfers. That way, you can gradually increase your contributions as you get more comfortable with the process.
Remember to make your savings goal achievable and realistic. It’s better to save a smaller amount consistently than to try to save too much and give up after a few months.
Choosing the right savings account is important when automating your savings. Look for an account with a high-interest rate and low fees. Some accounts also offer incentives for setting up automatic transfers.
Consider your savings goal and how quickly you want to achieve it. A high-yield savings account may be a good choice if you save for a short-term goal, such as a vacation.
If you’re saving for a long-term goal, such as retirement, an investment account may be a better option.
Research different banks and financial institutions to find the best account for your needs. Don’t forget to consider the convenience of the account, such as online banking and mobile apps.
You should review the terms and conditions of the accounts you’re considering to check for any fees the bank may charge.
This step is crucial to avoid unexpected fees that could reduce your savings progress. It’s always better to be safe than sorry!
Once you’ve determined your savings goal and chosen the right savings account, it’s time to calculate how much you need to save. This will depend on your savings goal and the timeframe you want to achieve it in.
To calculate how much to save each month, divide your savings goal by the number of months you have to save.
For example, if your savings goal is $10,000 and you want to achieve it in two years, you’ll need to save $416.67 monthly.
Remember to factor in any interest or investment returns you expect to earn on your savings.
Deciding on a schedule for automatic transfers is an important step in automating your savings. Consider your pay schedule and when you’ll likely have extra money in your account.
For example, if you get paid twice a month, you may want to set up automatic transfers for the day after your payday. This ensures you have money for bills and other expenses in your checking account, and the remaining balance is transferred to your savings account.
You can also consider setting up automatic transfers weekly or bi-weekly, depending on your needs and preferences.
When figuring out the best schedule for your automatic transfers, consider the timing of your bills. You don’t want to risk overdrafting your account by scheduling transfers simultaneously with your bill payments.
Make sure to plan accordingly to avoid any potential financial hiccups.
Setting up automatic transfers is one of the most important steps in automating your savings.
By setting up automatic transfers, you can ensure that you save a portion of your income consistently. This also eliminates the need to transfer money into your savings account each month manually.
To get started, log into your bank account and find the option for automatic transfers. From there, you can select the amount and frequency of the transfers.
Make sure you choose a feasible amount that fits your budget. For example, if you get paid bi-weekly, you can set up a recurring transfer for the day after payday.
This way, you won’t have to think about transferring money each time you get paid. You’ll also be less likely to spend the money that’s earmarked for savings.
Once you’ve set up automatic transfers, it’s important to monitor your progress regularly. This can help you stay motivated and adjust your plan as needed.
You can track your progress through your:
If you’re falling behind on your savings goal, don’t panic. Revisit your budget and make adjustments as needed. Maybe you can cut back on some expenses or look for ways to increase your income.
Your savings plan is not set in stone. You may need to adjust it as your financial situation changes. You can increase your monthly savings if you get a raise or earn more income.
Alternatively, if you encounter unexpected expenses, you may need to reduce your savings temporarily. The key is to be flexible and adjust your plan to ensure you can continue to save consistently.
It’s important to celebrate your savings milestones along the way. Reaching a certain amount in your savings account or paying off a debt deserves recognition.
Take the time to acknowledge your progress and pat yourself on the back. This can help you stay motivated and focused on your financial goals.
You can celebrate by having a nice dinner or buying something you’ve wanted for a while. Just make sure you don’t overspend and undo all the progress you’ve made.
Sticking to your savings goals can be challenging, but there are ways to help you stay on track.
Here are some additional tips to keep you motivated and focused:
Automating your savings can help you achieve your financial goals and build wealth. Limit spending, avoid impulsive purchases, identify triggers, and educate yourself. By following the steps and tips in this guide, you can save more money effortlessly and efficiently.
Consider becoming a 121 Financial Credit Union member to support your financial journey further. We provide affordable financial products and services and free counseling to members.
121 Financial Credit Union also provides savings and checking accounts to suit your financial needs. Contact us today to learn more and take advantage of our products, services, and member-focused approach.