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By Free From Broke
I like to think I’m smarter than the average bear. But with a full-time job and three kids it can be tough figuring out which way is up some days no less remembering to put money away for savings.
Enter Automated Savings!
If you didn’t already know, there are ways you can set up automated, recurring contributions to your savings account on a weekly, bi-weekly, 15th and end-of-month, or monthly basis. Right now I’m using weekly transfers!
But why automated savings? Couldn’t I just transfer an amount into my savings when I wanted? Yeah, I could. But I’ve discovered it’s not always that easy.
Here are six reasons why you need to set up automated savings:
Too Busy - There’s just too much going on in your life to remember to transfer money on a consistent basis. You might start off pretty good but missing a few transfers reduces your savings potential. Why not make it easier on yourself and automate it?
You’ll Spend the Money Otherwise - You get paid and the money goes into your checking account. Great! Then you pay your rent. Then a couple of other bills. Maybe you go out to dinner a couple of times. Before you know it the money in your checking is dwindling down and you don’t have enough to save. If you automate your savings the money goes right into the savings account and you don’t have a chance to spend it.
You Can Earn Interest Faster - A common way people save is to take whatever is left over in their checking at the end of the month and transfer it to savings. If you set up an automated withdrawal earlier in the month you have more time for your money to earn interest. Even by saving a little every week you earn more interest in the long run. Trust me it all adds up.
It Forces You to Save - Automated savings force you to save. The transfer takes the money out at every interval you set it up for. That’s it, it’s done. No thinking about savings or telling yourself you want to save. Bam! The account does it on it’s own.
It’s Easy - Seriously. Maybe it takes you a minute or two to set up a transfer. We all have busy lives and want to maximize our time to do the things we love. A couple of minutes one time saves you the trouble of transferring money every month (or whenever you would). Two minutes of your life and you’re on your way to building savings.
It’s Fun - Fun? Yup! So you set up a transfer plan. Say you don’t look at the account for a few months. You go in and all of sudden you see that you’ve accumulated a decent amount of dough and you’ve even earned some interest on it! Maybe it’s just me but I love seeing my money build up and grow!
There you go, six reasons to set up automated savings. Like I said, I’m not smart enough to remember to always put money into my savings account. You’re probably smarter than I am but I bet you would benefit from automated savings too!
Can you think of other reasons to set up automatic savings?
FFB writes at Free From Broke - Personal Finance Blog for Regular Folks. If you like this article you might consider subscribing to the Free From Broke RSS feed and his Twitter profile.
Tags: Automatic Savings, Free From Broke
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Great tips on saving! Making it automatic is definitely the smartest way to save. I have automated my monthly investments for retirement and for my kid’s college fund. This way there is nothing I have to do. It is easy and painless. Of course, automating your savings requires you to have a good budget in place to plan your spending wisely.
I automate as much as possible too! I can have my payroll check split up into many different accounts. So not only can they contribute to my retirement plan, 529 plan and HSA for me but they can also send $X to my savings account and $Y to my checking. I only consider the amount sent to my checking as my wages and totally forget about the savings account
The automatic savings plan definitely works. I would always make excuses not to save regularly. I have to pay this, I have to buy that. Once I’ve started an automatic savings plan I feel more secure. At first, I was skeptical about linking my checking account to my ING savings account but once I saw my money growing I would absolutely advise those that procrastinate with saving to open an automatic savings account.
I am fan of automatic payment and have auto pay for many of my bills. But when it comes to saving, I tried auto savings and don’t work all the time. It is because your expense changes every month. You can budget to save certain amount every month and setup auto savings. It will only work if your budgeted expenses are always permanent which is not the case. During summer you get high electric bills and eats up your savings, so only can do so much automatic and not full automaized. Otherwise you won’t have the wiggle room to accomodate expenses happens in those months. I have auto savings to my son’s education savings and my retirement savings but other savings its manual but I do it beginning of the month ritually after balancing my budget.
I like automatic savings. Yes life’s expenses can be irregular sometimes. Utilities are more expensive in certain months, and my car insurance payment is once every 6 months.
What I do is set up a fund to save for my car insurance & car maintenance (beyond my normal gas/parking) that I can pull from when these semi-annual or unplanned expenses come up.
For utilities, I have just started a “hedge fund.” In my spending plan, I plan for $X per month toward utilities. For me, summer is lower expenses so I am saving the extra between my actual expense and the “X” amount in a special Orange Savings Account. When winter (and higher expenses) comes along, I’ll pull from that account to help ease the burden during those months.
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While I agree that expenses change from month to month you can still try to find some amount that you know you will be able to put toward savings. My wife and I were squirreling away money from our salaries so she could take off to care for our children. When we moved to one income we knew we couldn’t save as much and weren’t even sure if we’d be able to save. So we started small. We set up an automatic transfer for $10 a week knowing we could afford that. $10 doesn’t sound like a lot but that’s $40 a month and over time that adds up. Had we not set that up we probably would have spent that extra money.
Set up something and when you’re confident you can keep it up ramp the amount up a little. You’d be amazed what you can actually put away in savings.
I think automatic savings has been the easiest thing to do now that I’ve made it automatic. I don’t have to remember to put something in the savings. It goes there automatic. I like going online to see my savings building up month by month. It has been very efficient and free from errors. I’m very happy that when others get a payment from my wages, I do too now.
It’s so easy for things to get out of control. We actually believe that all families should stress with their kids that saving is NOT optional. Here is our plan and it is one you can share with your kids:
If you are not already saving money automatically, begin with our 1% plan. When you get your next paycheck, look at the after-tax amount you get paid. Now – the goal here is to adjust your saving over time so it does not shock your lifestyle. Ready?
Take the after tax amount of your pay and multiply it by .01. Take that amount of money (before you pay even a single bill) and shift it out to savings.
Each time you get paid again, increase the amount by another 1% until you reach 20%.
At the same time, use any excuse you can to shift money out of checking. If you don’t know this about us, we believe your checking account is a money laundering account for other people’s money. Get it out, get it out, get it out.
It’s not about what you make – it is about what you KEEP as your own. That is our focus. We want to make it easier on you to keep more of what you earn.
You should have 15 to 18 months of expenses in emergency savings. The old 3 to 6 months is not working anymore. It is taking longer to find a job if you lose yours, and it is taking even longer to replace your income. Don’t mess around. Use our 1% plan to get yourself positioned to build this emergency savings fun.
Then…..ask yourself if you will have less stress with 15 to 18 months of savings in the bank?
You can join our free Facebook group. Just search for “Live The Lifestyle Your Family Deserves.” Check out our Twitter at BoostMoneyBlog. We talk about ING Direct all the time! There are easy ways to save - and you should use them all!
Thank you.
Loyd Ford
http://www.middleclassmoney.com
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