Automatic Savings and Scheduled Transfers

There are several effective ways to save. Saving automatically is considered one of the easiest ways to successfully save money; it is sometimes called “paying yourself first.” When money comes out of your income and goes directly into an account that is not your primary spending (checking) account, you don’t have to make a savings decision every pay period, but your savings account balance will increase.
 
A popular way of automatic savings is having money go directly from your paycheck to a 401(k) or other retirement plan offered by your employer. This is the most well-known way to save for retirement (or semi-retirement!) Some employers will “match” all or part of the amount you are putting into the account.
 
Another way to automatically save is to establish a recurring transfer. Generally, you set up a transfer from an account where your income is deposited to a savings or investment account. The savings account is usually an account that is not as easy to access; it may pay some interest on your balance. Some banks and credit unions offer a “Christmas” account option, a savings account with very low minimum balances.
 
Some employers and many payroll services allow employees to split their direct deposit into more than one account. A split deposit is a way to have part of your pay deposited to your spending account and part to your savings account. This is an excellent way to pay yourself first.

​In addition to these automatic savings methods, you may want to consider scheduled transfers to increase your savings rate. Employees with variable pay often find this works better than an automatic savings method. Evaluate your checking account balance each pay period or monthly, being sure to account for all expected spending. Then determine how much excess you would feel comfortable transferring to your savings. For example, if your monthly expenses are usually $3,000, and you want to keep a $4,000 minimum balance, seeing a $4,200 balance means you can transfer $200 to savings or pay down a debt by $200. When you see that extra $200, are you tempted to spend it instead of transferring to savings? Review your goals before you start this process. Thinking about the high interest rate you’re paying on past purchases or the vacation you want to take before checking your financial situation can help you stay on track.

A less common method of savings today should still be considered—save your loose change or extra cash. This method is particularly effective for people who have some cash income or use a cash method for budgeting and spending, like the envelope method. Essentially, you save the loose cash you have at the end of each day, or if you have extra money in your envelopes at the end of the week or month, you save it. Every little bit adds up!
 
How are you saving for your whealthiness goals?