Maximize Your Savings: 6 Strategies for Seamlessly Automating Deposits
When you save money instead of spending it, you gain financial freedom, security, and protection against job loss and emergencies. A substantial savings account can help entrepreneurs start a business, provide a cushion for car and home repairs, and allow people to plan for a stress-free, guilt-free vacation.
The key to successful saving is being consistent over time, and automating the process can make it easier to reach your goals. There are many strategies to choose from.
Kimberlie McGee, head teller at Addition Financial, a credit union in Lake Mary, Florida, has observed the habits that help successful savers and those that hinder others. She advises her customers to automate their savings to achieve success.
**Automate Small Deposits for Manageable Goals**
The easiest way to automate your savings is to set up your banking app to transfer money on a schedule, eliminating human error and forgetfulness. McGee suggests having a small direct deposit go into a higher-yield savings account and setting a quarterly goal. The focus should be on “small” and “quarterly.” For instance, saving $12,000 in a year might seem daunting, but breaking it down to $1,000 a month or $230 a week makes it more manageable. Monitoring your progress periodically and adjusting your strategy as needed is crucial.
**Lay the Groundwork Before Moving Money**
Forbes expands on McGee’s tactic by suggesting you determine whether your goals are short-term (less than one year), mid-term (one to five years), or long-term (five years or more). Specify your goal, analyze your budget to ensure it’s feasible, set a schedule, and track your progress.
**Treat Saving as a Bill**
Both McGee and Forbes agree that treating saving as a bill you must pay can help you save more effectively. Automatic transfers can help you avoid the temptation to spend the money in your checking account.
**Round Up Your Purchases to Save as You Spend**
The Acorns investing platform popularized the round-up concept, and now many banks offer similar programs. McGee mentions that people can enroll in a round-up savings program if their institution offers it. For example, Bank of America calls it Keep the Change, and SoFi calls it Spare Change Savings. The concept is simple: your banking app rounds up the purchase price of items to the nearest dollar and deposits the difference into a savings account. This method ensures you save a little bit every time you spend money.
**Get a Head Start with a CD — or Several**
With current interest rates being high, CD yields are generous, offering guaranteed returns and the peace of mind of FDIC insurance. McGee advises researching financial institutions to find short-term certificates of deposit that may be paying 4% or 5%, which can be a good way to jump-start your savings.