One of the biggest reasons most people don’t save money is because they have to make a decision to save a portion of their money each month or with each pay check. Those that have to write a check to themselves each month, bi-weekly or weekly can often find a reason as to why they don’t have the money to save. Those that do this will always find themselves in a state of financial emergency when they need money the most. Instead of having to set money aside manually, it’s best if it’s done automatically.
The theory around automatic savings is simple. People are used to spending the money they see available in their checking accounts. When they don’t see the money there, they can’t spend it or make excuses as to why they aren’t able to save it. This takes the responsibility of saving a portion of their money out of their hands and increases their savings account balance.
How to Save Automatically
There are 2 well known ways to save money automatically. They are easy to do and something that can be done in a few moments.
The first way to start automatically saving is through a change in direct deposit information. Most people that have direct deposit will have 100% of their pay check put into their checking account. Instead of having 100% of the payroll check deposited into a single account, people can have a small percentage or a specific dollar amount taken from their check and deposited into an interest bearing savings account. Those that choose to do this will find that it’s easier to get used to saving if it’s done automatically. Not only will an automatic deduction help them save money faster, compound interest will be in their favor as well.
Another way people can save automatically is to take advantage of their bank’s automatic bill pay feature. Most banks offer their customers the option to pay their bills automatically. This is a feature that many take advantage of because they don’t want to worry about missing a bill in the mail and ruining their credit score. Instead of just using the automatic bill pay feature for bills, banking customers can use it to have money drafted into a different account.
Having money drafted from one account into a different account using the automatic bill pay feature is just as easy as setting up the account to pay bills. Those that choose to have the money they want to save automatically drafted should check with their bank to make sure the service is free and how many drafts they can use per month. With that information in mind, people should decide how much money they are going to have drafted from their account into their savings, 401(k), money market or other account. Once that amount has been determined, the paperwork should be submitted to the bank and the savings will begin.
When people begin to save automatically save, they see they get used to not having that money to spend. Although it’s hard to begin, the nest egg that can be grown is amazing. Allowing money to be automatically saved can help people become financially free faster and easier than they thought. Automatically saving money can lead to a financially secure future for millions of people if only they give it a chance.