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how to automate your savings
— save fast for travel with this step-by-step guide—
June 1, 2020
What is Savings Automation?
Savings Automation is a way to set up your accounts so that your saving becomes automatic with every paycheck. It allows you to set it and (hopefully) forget it, and it’s truly the key to becoming a better saver all around.
There’s a saying that goes something like, “There are two types of people—savers and spenders.” Well, if you feel like you might be a spender, don’t worry, you aren’t alone. With the constant stream of ad-infused content out there on TV, in print, and on social channels, it’s hard not to spend. That’s why adopting savings automation is so important. And once you get into the habit, before you even realize it, you’ll have cash piling up for a whole new adventure.
Sounds great! How do I set it up?
STEP ONE:
Start by having a portion of your direct deposits go automatically into one or several “dedicated” savings accounts. You can do this a couple of different ways. One of the easiest is to ask your bank or credit union to set this up for you. Simply let them know how much of your paycheck you want set aside into these dedicated accounts, which can either be a set dollar amount or a percentage.
So what do we mean by dedicated savings accounts?
Almost every bank and credit union allows you to open up multiple savings accounts under one “master” account, and it doesn’t cost you anything extra. These dedicated accounts are technically tied to your main or master account, and so there are no separate account numbers to memorize, and you can even name them whatever you want!
Let’s take a quick look at an example from when I first began doing this at the start of my career. My direct deposits looked something like this:
Emergency Savings — $25
Christmas Savings — $50
Vacation Savings — $50
Down Payment Home Savings — $100
Checking — Net or the Remainder of My Paycheck
Notice I set aside money for each thing that was important to me at the time. This is often called “paying yourself first.” And the savings happened automatically, so I only needed to worry about what was in my checking after the direct deposits hit my account. This method accounted for my savings goals and made sure I was making progress toward them with every single paycheck. It was a total game-changer for me, and for the first time in my life I was able to save successfully.
Our current dedicated accounts have fun names like “TRAVEL” and “AIRBNB” to align with our current savings goals, but you can name yours based on whatever inspires you.
STEP TWO:
Once you have started splitting up your paycheck or if you don’t get direct deposit, take things to the next level by using a roundup feature offered by certain debit and credit cards. By rounding up every purchase to the next dollar amount, you can quickly add another layer to your savings. If that’s not an option with your bank or credit union, then consider downloading a FIN-TECH (financial technology) savings app to your smartphone.
There are a variety of popular options out there right now, and the space will likely only grow. Acorns, Digit, Qapital, and Chime are just a few of the industry players, and we’ll be reviewing each in upcoming emails and articles to help you navigate all the options out there.
Vincent Neal, co-founder of Travels and Curiosities, has been teaching financial literacy out in the community for over 10 years for roles in credit unions across the United States. His experience working within the credit union movement has taught him to become a fiercely dedicated saver without sacrificing day-to-day happiness and living life to the fullest.
