A Simple Plan to Save Money Automatically

So you want to save money but find it difficult to save? Saving can be challenging and intimidating. And for years, I believed I could never save money until I learned how to save by having it done automatically.

Initially, there’s a bit more work upfront, but once you’ve got it set up, it’s hands-off for the most part. I do recommend tracking and tweaking the plan along the way. You want your money to work for you by allocating it to the right goals with just the right amount of cash. So if this sounds a lot like budgeting, well it is part of the “pay yourself first” category in a budget.

Create an automatic savings plan

Having an automatic savings plan can mean financial stability and security. With a plan, you’re thinking less about saving and actually have more savings. Before creating the automation process, you’ll need to start with identifying your goals.

Think about the things and experiences you want. And write them down.

What are you saving for? Want to buy a new car or planning to buy a home in a few years? Are you dreaming about travel?

For example, if you want to travel, determine how much you’ll need, then open a travel fund and set automatic savings each payday until you reach your goal. Or use any other automatic savings method I’ll discuss below in combination or separately to reach your goals.

Save with each paycheck

The following is how you can set up automatic savings:

1. Enroll in direct deposit. Don’t spend another minute manually depositing your paycheck. Get your cash each and every single payday directly into your checking account. This is the first step in automating your savings.
2. Split your deposits. You might have the option to split your direct deposit between a checking account and a savings account directly with your employer. And you might also be able to set direct deposits with two different financial institutions.
3. Set up automatic transfers. Once your paycheck hits your account, the bank, credit union, or app will immediately transfer specific amounts you’ve chosen into multiple savings accounts. To do this, you’ll need to open multiple savings accounts, give each account purposeful names, and set up the auto transfers online.

Schedule recurring account transfers

A very simple way to automate your savings is to set up recurring auto-transfers from your checking account into a savings account or using an app to withdraw money on a schedule.

Review how you can set auto-savings on a schedule with your bank or credit union. Or if you want to save with an app or mobile bank that pays higher interest, then log onto that app and set a savings transfer schedule. You can find savings options in the financial marketplace.

Save with AI and IFTTT Help

There’s another option to save money using savings apps with artificial intelligence. With AI savings apps, they decide when to withdraw money from your savings account by analyzing your income and spending. They’ll transfer a “safe” amount from your checking into a separate savings account. The most popular is the Digit app and Empower. Both apps, however, charge for this service.

Another method is to use apps that employ or IFTTT algorithms which stands for “If this, then that.” This means you set conditions for saving. For instance, you can set a condition that every time you walk 10,000 steps in one day, then $5 will be transferred from your checking account into a savings account. You can even set conditions related to your social media use. Popular apps that offer IFTTT seamlessly is Qapital.

Save as you Spend

Want to save more money? You can use apps that round up your purchases then transfer that amount from your checking account into a savings account. These apps automate savings by tying it with spending. It looks at your debit or credit card transactions or any withdrawals made from your checking account.

For example, spend $3.50 on coffee with your debit card, then the app rounds up the purchase to $4.00 and transfers the $0.50 difference into a savings account. Have a utility payment withdrawn from your checking account? The app will round up to the next dollar and transfer the difference into a savings account too.

I like these apps as a supplemental way to grow savings. And many of the apps allow you to automate savings with scheduled transfers too. Apps like Acorns, Chime Banking, and Qapital round up purchases and saves the difference for you. With Acorns, however, the micro-savings are invested in exchange-traded funds (ETFs). So you’re investing, not just saving.

Save Purposefully

Reach financial security sooner and gain peace of mind by saving automatically. Automating helps achieve financial goals and should be considered part of a comprehensive purposeful savings strategy. A strategy that clearly defines what you’re saving for and a savings plan for your short, mid-, and long term goals.

To make the most of automation to save successfully, you’ll need to review your budget, track your spending, and monitor your progress. Sure, it’s nice to set it and forget it, but remember you’re saving for a reason, not just a season.

Things to keep in mind:

• Make necessary changes and keep an eye out for opportunities to earn more with your savings using high-interest savings accounts, money market accounts, or certificates.
• Use your savings for its intended purpose, nothing else. Unless you’re in an extremely dire situation that requires using money from all your savings accounts.
• Choose a savings account that has little to no fees and is accessible.

And finally, as you save for the things you want, you’ll need to make sure you save for the things unexpected. There are two savings goals I recommend everyone having–rainy day and opportunity fund–as part of an emergency fund strategy.