Good management of personal finances is key to achieving financial stability and meeting long-term savings goals. While there are many ways to build up a nest egg, one of the simplest and most effective is to automate your savings deposits. This can be done by setting up recurring transfers from your checking account to your savings account, or by setting up your direct deposit so that a portion of each paycheck goes directly into your savings account.
How to Set Up Direct Deposit for a Savings Account
Splitting your direct deposit into more than one bank account is pretty straightforward. You can essentially follow the same steps that you took to set up direct deposit into your checking account. Your employer will typically have a form that you can fill out to specify which account you would like your paycheck deposited into. You can list more than one account and earmark a percentage of your paycheck for each. Your bank may also be able to provide you with a direct deposit form that you can fill out and return to your employer. In this way, you can split your paycheck so that a specific amount is deposited directly into your savings account, while the rest is deposited into your checking account.
Some banks allow you to change your direct deposit accounts electronically, without contacting your employer or filling out a paper form. Bank5 Connect, for example, offers a feature called Switch My Bank which lets you designate bank accounts for your direct deposit online with just a few clicks.
How to Automate Savings Transfers
Another way to stay on track with your savings initiatives is to automate transfers from your checking account into your savings account. Setting up recurring savings transfers can provide you with the same financial benefits as automating direct deposits into a savings account.
By automating the regular transfer of money into your savings account, you can potentially reach your financial goals faster. Setting up automated transfers can be especially helpful if you have regular funds coming into your checking account outside of direct deposit.
Most banks allow you to schedule recurring transfers from one account to another through online banking or mobile banking. You can also typically adjust these scheduled transfers as necessary.
Benefits of Automating Your Savings
Automating your savings efforts through direct deposits and recurring transfers can be an effective way to stay committed to your financial goals and achieve them more quickly. Some specific benefits of automating your savings can include:
- Helps you avoid forgetting to move money into your savings account
- Takes away the temptation to spend money that’s sitting in your checking account
- Allows you to grow your funds through compound interest (especially if you have a high-interest savings account)
- Helps you develop a good habit of regularly saving
Keep in mind that there is no set amount you must deposit into your savings account each month, but a good rule of thumb is to start with an amount you know you can afford to save. Get a sense of your monthly expenses so you have a clear idea of how much you can put aside for savings. You can always cut back on your expenses and increase your automated savings down the road.
If you want to reach your savings goals faster, consider automating your savings today. Find a high-interest savings account that will help you grow your money, and get to work splitting your direct deposit into your new account and setting up recurring transfers to help you achieve your savings goals.