The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.
According to the U.S. Bureau of Economic Analysis, Americans saved roughly $646.3 billion collectively in June. That figure translates to about 4.8 percent of our disposable income. That savings rate is dismal, even though it was up slightly from May. At its most recent peak in December 2012, the savings rate was about 11 percent.
The picture for adults under the age of 35 is even bleaker. In 2014, adults aged 35 and under had a savings rate of negative 2 percent, according to data compiled by Moody’s Analytics. If you are one of the millions of Americans that are not saving enough for the future, don’t despair.
There are a number of methods you can use to automate your savings and save more money quickly. Automating your savings is important because it allows you to continuously save without having to think about it. It also reduces the chances that you will divert the funds for other spending.
Here are some of the best methods to use to automate your savings:
Automatic Direct Deposits
The easiest way to automate your savings is to have the amount you want to save taken out of your paycheck each pay period. Many of the companies that offer direct deposit for paychecks also allow employees to split their check into several different bank accounts. You can have a specific amount or a set percentage of each check deposited into a savings account with the rest deposited into a checking account for spending.
Automatic Money Transfers
If your employer does not provide direct deposit services, you can still automate your savings by setting up an automatic transfer from your checking account to your savings account. Simply log on to your bank’s online portal, determine the amount that you would like to transfer, choose a monthly transfer date, and confirm your choices. Every month, the amount chosen will be automatically transferred from your checking account to your savings account without you having to take any further action.
Sign Up For A Round-Up Program
Several banks now offer a feature where they round up your account transactions and deposit the difference into your savings account. For example, if your debit card purchase from a grocery store totaled $87.60, the bank would deduct $88 from your checking account and deposit $0.40 into your savings account. As anyone who has every saved their change knows, these small increments can add up to a considerable amount of money over time.
Apps That Automate Your Savings
Acorns – The Acorns app automatically invests your spare change in exchange-traded funds. When you purchase items with your credit or debit card, the app rounds the purchase up to the next dollar and invests the difference in previously chosen investments. The service is free for anyone that is under 24 years of age or that is currently a student.
Betterment – The Betterment app allows users to set up automatic deposits that are then invested according to the users’ age, investment horizon, and risk appetite. Betterment then checks your portfolio daily and will automatically rebalance it through buying or selling securities or using deposited cash to purchase additional securities. The program is fully customizable and the parameters can be changed at any time.
Digit – The Digit app analyzes how you spend your money. When it detects that you have extra cash, it automatically deposits it into an FDIC-insured Digit savings account for you. When the money is in your Digit account, it can only be transferred back into savings. It is an easy way to save a little extra money each month.
Qapital – The Qapital app lets users set up savings targets tied to certain financial parameters, such as spending. When a user spends a certain amount of money in one of those parameters, a predetermined amount of money is transferred to a savings account. There is also a feature that lets freelancers save a set percentage of their income automatically to pay their quarterly taxes.
Simple – The Simple app from BBVA allows users to designate a small amount of money that will be transferred to their savings account from their spending funds in small daily increments. Because the transfers are occurring in small amounts on a daily basis, the user will not even miss the money from their account.
Final Thoughts
Automating your savings will save you a lot of time and effort while ensuring you are putting money away for the future. While these options are generally “set it and forget it,” you should still review these accounts on a regular basis to ensure that you are making progress towards your savings goals.
During your review, you may find that upping your contributions to your savings accounts are in order or you may find that too much money is leaving your checking account. Rebalancing these contributions on a regular basis based on your financial situation can increase your future financial stability.
These saving methods work best when the money is allowed to remain in your savings account for a long period of time. Emergency savings that may be accessed at any time should be kept separate from your long-term savings in an easily accessible account with no withdrawal penalties. Your long-term savings should be stashed in an interest bearing account so that your money can grow over time from interest payments.
How about you all? Have you tried any of these automatic money saving strategies? Do you have other automatic money saving strategies you’ve tried successfully?
Share your experiences by commenting below!
***Photo courtesy https://www.flickr.com/photos/68751915@N05/6355251231
