You know you want to save more money. You may already save a little here and there, maybe even your annual bonus or tax return. This is the point where your savings account finally starts building up a balance and providing a little extra piece-of-mind.
But then life happens. You find yourself dipping into your savings account to cover some unexpected expenses or you have a high spending month and need extra to pay your monthly credit card balance. Your savings starts dwindling down again until you find yourself right back where you started.
Why does this happen and how do you prevent it? How do you successfully build up an emergency savings fund?
The answer is more simple than you’d think. Automate your savings. If there was one single thing I would recommend you do to improve your finances, it would be this. Learn how to automate your savings.
There is so much power in automating your savings.
Automating your savings is the perfect way to successfully pay yourself first and begin building wealth for a secure financial future.
You will save more money and not even notice that it’s happening.
Initial steps to automate your savings
First off, a few words on what you need to do before you start automating your saving.
- Review your income deposits
- Determine your savings goals
- Decide how much money to budget for each savings goal
- Create a savings account for each goal
Once you have completed these steps, you are ready to start automating the process of stashing a little money away for each of your goals, all without thinking about it. Since this is going on in the background, and you know how much is being diverted to each account, you can calculate exactly how long it will take you to achieve each of your savings goals.
Track Your Expenses
If you haven’t done this yet, here’s some resources to get you going:
Establish A Budget
I also have a workbook and printable pdf worksheet to help you do this. You can download them instantly from the free Resource Library. If you don’t have access yet, here’s how you get it:
Fine Tune Your Budget and Determine How Much You Can Save
Aim to save a minimum of 10% of your gross income. If you can’t manage this amount, review each area of your budget and find ways to make it work. Be sure to include in this amount any automatic contributions you have established to your employer sponsored retirement account.
Note: If you think I’m crazy and saving 10% of your income is too much, please read the following book and post on the topic.
Automate Your Retirement Fund Contributions
If you have an employer sponsored retirement account, and your company offers matching contributions, you’re in luck. It’s free money! So, make sure that you are contributing at least enough to receive the maximum matching benefit.
Make sure that you have set up automatic contributions so that a percentage of you income goes towards your retirement account before you ever see it. Then, be sure to review your contributions annually and increase contributions along with pay raises. Make sure you are on target for your retirement savings.
For further reading:
Auto Transfers Through Your Bank
Once you have your automatic retirement fund contributions set on auto-pilot, it’s time to start automating your savings!
The easiest place to start is with your current bank. If you have both checking and savings accounts with the same bank, see if they offer an easy (and free!) service to automatically transfer a certain amount of money from your checking account to your savings, every month.
Of note, you may not even need to have your savings account with the same bank. Many banks allow you to make automatic transfers to another account.
Anytime you have income deposited to your account, have a percentage automatically transferred to a savings account. Many banks even allow you to establish a savings goal and the ability to track and monitor your progress, easy tracking from a phone app, or smart savings which will adjust your savings based on your spending habits.
Banks That Offer Savings Tools
Note: All online banking options listed within this post are FDIC insured.
Bank of America
Bank of America offers a Keep the Change Savings Program. Every time you make a purchase with your BofA debit card, the amount is rounded up to the nearest dollar and the extra change is transferred to a different savings or checking account. Over time, the extra change adds up.
Chase offers Autosave, a tool that can be used to set a savings goal, then an amount and the timing of your autotransfers. You can choose to pay on a schedule or simply whenever you get paid. Using the Chase phone app you can then easily monitor and track your progress through the savings dashboard.
Capital One 360
Capital One 360 is a free online bank that offers a great savings program. One of the best features is the ability to have up to 25 different savings accounts so you can work on multiple different savings goals. They also offer a checking account so you can have all your banking needs in one place.
While their interest rate isn’t the best compared to other online savings options, it is so simple and easy to use that you’ll probably save more money overall.
Qapital is a fun, goal based, savings platform. All you need is a checking account and a cell phone with the Qapital app. Upon signing up, you link to your current checking account, which becomes your funding account. This is the account your income checks are deposited into, then Qapital will transfer funds from that account into your new Qapital savings account.
Within the app you establish saving goals and rules, then money is transferred from your funding account to your Qapital account and then divided into your different savings goals. There are different membership tiers but the basic offers the main savings features for $5/month.
Chime is a mobile only bank that also has some great automated savings features. They offer free FDIC insured savings and checking accounts. When you use the Chime debit card to make purchases you can choose to round up and save the extra change. The main benefit is the free checking and savings, with access to many free atms and free check writing service as well as the automated “set it and forget it” saving features.
How I Automate My Savings
I have the benefit of using USAA for all my banking and insurance needs. They are only available to those serving in the military, or by marriage or direct descent of individuals that have served. I have three automated savings transfers set up for my checking account.
Many years ago I set up an allowance of $25/month for my son. I have this automatically transferred from my checking account to a dual checking/savings account. This is the account that he uses for all gift money and extra earnings.
I started this habit back when I was barely surviving paycheck-to-paycheck. But I wanted a cushion for my son and I wanted to teach him smart money habits from an early age. So, I gave up Starbucks and eating out for lunch and instead transferred the $25 to my son’s account every month, whether I felt the pinch or not.
This really came in handy down the road when my son needed a new laptop for school and I didn’t have the savings to purchase. My son was super proud to be the one to make the purchase himself. He also appreciates it and treats it better than had it been another gift from me.
Automating Old Debts
Another automatic savings transfer I have established occurs once a month for $420. Once I paid off my car, I continued paying myself the loan amount. I was making car payments on the 15th of every month, so I kept the same date and now transfer the money to my savings account.
Utilizing Savings Tools
The third automated savings I have established is a lot more fun. USAA offers a smart savings tool (in the form of a working German Shepard named Tracker) that uses an algorithm to monitor my spending. When I’m not spending as much as usual, it will automatically transfer a little extra money from my checking to my savings account. I receive text messages daily that both entertain and keep me updated on how much I’m saving. At any time I can text “Save more” or “Save less” if I need to make adjustments. On average, I save an extra $130 every month, and my bank does the math to determine the safe amount to transfer over.
Each of these savings features is automated and allows me to set it and forget it. I simply don’t notice the extra money so I don’t feel deprived of it.
Apps That Help You Save
If you don’t want to use your bank for automating all your savings goals, there are a number of apps that will help you save.
Apps That Round Up Your Purchases
Bank of America – Keep the Savings Program, Chime, Qapital
Each of these banking options was discussed above, but what sets these three banks apart is how they save you money and the app they have available to use. Each offers the service of rounding up your spending and depositing the extra change into a separate savings account. Progress can easily be tracked through each bank’s available app.
Acorns links accounts you already have and applies your savings to your investing accounts. Rather than an app to help you save for your emergency fund or a certain goal, it applies the extra change to your long term investing accounts.
The Boostup app links to any account you have (within their partner list), including your credit cards. Anytime you make a purchase through a linked account, the extra change is moved from one designated account to your Boostup account. This is a great way to utilize whatever accounts you already use and simply add the service of rounding up purchases and automatically saving the change.
Boostup also offers additional perks, like crowdfunding, partner bonuses and home loan matching up to $750.
Similar to Boostup, however the savings you accumulate in Qoins is applied not to a savings account but to your debts. So if you have debt to payoff, this is a nice tool to add a little extra to your monthly payments without really noticing.
Other Apps With Savings Tools
I’m adding this one again because the app features are unique. While you do still need to have an open account with their online banking, once you do, the app is easy to use and provides some great savings tools.
Digit is similar to my USAA Tracker, this program uses an algorithm that monitors your spending habits and determines how much you can save, then automatically makes transfers for you.
If you are worried that it might accidentally transfer more than you have, Digit will reimburse up to two overdraft fees.
As money accumulates in your Digit savings account, you can request to transfer to a different account at anytime, usually within one day.
Dobot is similar to Digit but offers a cleaner interface. The main downside is that you don’t earn interest on your savings. Of note, Dobot is part of the same bank that houses your Boostup savings.
If you like playing games, WinWin might be the savings app for you. It can motivate you to save more. Spend $1 to play a game and that dollar goes to your savings account. You have the chance to win up to $100 bonus. Uses Wells Fargo, FDIC insured, you can transfer to your own banking account at any time. Free for now.
Tip Yourself is a service that aims to change your money mindset and your habits, which will help you save more money. They do not offer automated savings, however, they do help you learn the habit of tipping yourself, aka, paying yourself, first. Only once you have the habit and mindset to manage your money are you ready to set it and forget it with automated saving.
You choose how much to tip yourself, why you earned that tip, then you gain pride and motivation as you watch your tip jar grow.
If your savings account is looking a little depleted, it’s time to change your savings habits. Automating your savings is a great way to save more without even noticing.
It’s a whole new way of effectively paying yourself first.
Whether you prefer your traditional brick and mortar bank, love the flexibility of online banking, or are looking to invest a little more, there is an app or service that can help you reach your goals.
One final note: The end goal is give every dollar you earn a place to go. If your money doesn’t have a specific job, working for you to build wealth and achieve your financial goals, then it is money sitting in your account and asking to be spent on things you don’t need.
If you feel like you are living paycheck-to-paycheck at the end of every single month, you are doing this right!
- Understand your spending by tracking your monthly expenses
- Establish a budget so you know exactly how much you can save
- Don’t forget to continually revisit your budget. As you become more aware of your spending and ability to save, you’ll be able to increase your savings rate.
- Review what tools and services your bank offers. Check for the ability to set savings goals and automatically transfer funds to a savings account.
- Review the list of apps available to find the right savings tool for your needs.
- Choose your tool, set a savings goal and start saving!
- Reach out with questions, comments and success stories by leaving a comment!