Everyone knows how important it is to have a savings account, but many Americans fail to create a financial cushion for when those unexpected expenses crop up. Some workers struggle to bring in what they feel is enough income to create an effective savings, while others fail to create a system to facilitate and manage their savings goals. That’s where automation comes in.
In recent years, automation – that is, using an automatic system to eliminate the need for a manual task – has taken the finance world by storm. Automation is a valuable tool for consumers who are looking to start building a savings from the ground up. We take a closer look at why automation is worth investing your time and money in and offer advice on how to get your savings started now.
The Case for Automation
Traditionally, a savings account is built by simply transferring money piecemeal from one account to the next. But automation updates this process for the modern age, allowing consumers to experience the benefit of their hard work in the easiest way possible. Because transfers happen automatically, you never have to remember to tend to your savings account. Everyone these days has such busy schedules that it’s easy to imagine many would-be savers might forget or opt not to move money into their savings, especially if finances seem especially tight in the moment.
In addition, automating your savings means that you can get accustomed to not having the money that you have specifically earmarked for your savings. As such, you won’t have to worry about feeling tempted to spend this “extra” money. Since it goes straight to your savings, you’ll be able to accumulate a significant total sooner than you would otherwise, leading to a much higher return on your investment (based on your account’s interest). Automation helps you to maximize your savings in a way that just isn’t possible with any other method. Imagine being able to create a nest egg for you and your family without ever having to give it a second thought.
Tips for Effective Saving
You may be thinking that you cannot possibly start building your savings right now. After all, you might not have enough available income or foreknowledge of how to even begin. Luckily, effective savings doesn’t have to be as dramatic or complicated as you might think. In fact, here are a few first steps to keep in mind:
- Crunch the numbers: Before you make any assumptions about what you can or cannot dedicate to automated savings, it’s worth taking a close, unbiased look at your income and expenses. Chances are, you will find a way to squeeze in a bit of savings amidst your budget. Even if that means skipping that extra meal out at the end of the week or keeping your next shopping trip in check; small sacrifices can translate to big rewards.
- Start small and ramp up: While you’re reviewing your budget, remember that every little bit helps. Sure, many financial experts assert that you should ideally be saving at least 10 percent of each paycheck. However, if this is out of the question, don’t feel like saving is an impossible task. Once you calculate where savings can fit into your life, you can commit to a reliable amount each week or month. Then, as you become more confident in your ability to save, you can increase that total by a percentage point or so. Also, don’t forget to adjust your automated savings contributions as your income changes, whether for good or ill.
- Spread the wealth: Once you decide how much you can realistically save, you’ll need to settle on how to allocate this total. Consider investing some of your savings in your retirement contributions as well as your other savings accounts. The pros and cons of each account will vary, but it’s best to deposit at least some of the income you have earmarked for savings in each account, giving you an easy way to diversify your savings.
- Design your automation: Given today’s marketplace, you have a wide variety of options when it comes to finding ways to automatically manage your money. You can, of course, set up automatic transfers or deposits from one or several accounts to your savings destinations, but if you’re serious about dedicating some of your hard-earned income to the cause, you may choose to set up a direct transfer through your employer. Most companies that offer direct deposit will allow you to send an established percentage of your paycheck to a separate account. It’s one more way to save without even realizing it.
- Read the fine print: You very well might already have a trusted savings account in mind. Still, if you are on the market for a new one, be sure to take a close look at what’s involved before you select which account(s) are right for you. For example, many otherwise attractive savings accounts have specific conditions, such as additional fees or minimum required balances, that might detract from your savings goals.
- Keep the fire burning: Building a savings isn’t for the restless. You’re sending a chunk of your income into an account where it will not be touched for likely years on end. So, you’ll need to find ways to keep yourself motivated. Track your progress and set goals for yourself. Checking your savings account balance regularly will allow you to see the fruits of your labor and keep you going. Just don’t withdraw from it!
The Road to Savings
Now that you have some ideas about how to super-power your savings, you might be interested in how the new AAA/Discover deposit program can take things a step further. With four high-yield savings products to choose from, you can maximize your savings account and accelerate its growth at the same time, allowing a much faster development than you’ll find elsewhere. Interested in getting started? Just visit our website for more information, and let’s get you that much closer to the savings you and your family deserve.