RebelCapitalist: Financial Information for the Rest of Us

Automatic Savings Tip No. 2

May 13, 2009 | By: Mr_Blue | Tags: savings, direct deposit

Sorry for the confusion but this tip should actually be No. 1. Making savings automatic. Technology today makes saving automatically very easy.

One way to make savings automatic is to have your pay check directly deposited into a bank account (preferably at a local credit union) if your employer allows that option. Many employers’ direct deposit programs will allow a person to divide up or allocate certain amounts to separate accounts. For example, if you have a checking account and a savings account then you can allocate your pay check, you can have $200 per pay check go into a savings account and the rest go to a checking account for living expenses.

Another way to make savings automatic is to schedule a certain amount of money be withdrawn from your main account (typically checking account) the same day each month and deposited into a savings account or some other deposit account (eg. money market account). This is typically done with electronic banking and can be a very useful way to save money. For example, I have a certain amount of money automatically deposited in my children’s college savings accounts. It withdrawal/deposit was set up electronically through the college savings program. This could be easily done online through an online banking system.

Make savings automatic is made easier with the use of technology. But absent technology it is a matter of making savings a good habit. Good habits are hard to break.

Good luck.