Daily bombardment by one-click shopping ads and an ever-present temptation to spend can make saving money challenging. Boost success and automate your savings with these nine easy steps:
1. Earmark income for investment.
Whether it’s babysitting money, all of the coins you receive in a month, or a portion of your regular paycheck, designate certain funds for savings and investments. Identify an account to funnel these earnings into and deposit them into that account immediately. No amount is too small; your savings will grow quickly through the benefits of compound interest.
2. Save your tax refund.
Looking for a lump sum to get started in the savings game? Save your tax refund, and pledge to do so every year. If your savings account already contains 6–12 months of emergency expenses, consider plugging your tax refund directly into your IRA.
3. Regularly deposit into savings.
Automated deposits are easy and effective because they take money directly from your paycheck and put it where you need it – into a savings account that contains enough to cover at least six months of living expenses or foreseeable emergencies, preferably a year’s worth. If your savings account is already plussed up, reroute your automated deposit into investment accounts, such as mutual funds or IRAs. Contribute to a Health Savings Account or college fund if appropriate; or continue to build savings as you work toward a large investment purchase, such as a house or land.
4. Split your direct deposit.
If your employer offers direct deposit, ask if they will accept multiple deposit accounts. If they will, put some in savings and some in checking. If they won’t, set up a recurrent transfer on your pay day. Though they are both liquid, thanks to online banking, we tend to have a greater psychological resistance to spending money from our savings accounts.
5. Favor interest-bearing accounts.
Once you’re saving, make those accounts work for you! Do your research online, or call up a bank representative to learn which accounts bear the most interest at your institution. Often something as simple as keeping less in your checking, which typically has a low interest rate due to the fluidity of the account, and more in your savings, can result in larger gains over the course of the year.
6. Use a cash-back credit card.
When you spend, do so with a credit card that earns you cash back. Like any credit card, remember to treat it like cash, buying only what you can afford at that moment and paying it off regularly.
7. Household accounts.
Some banks offer incentives for “house holding,” or consolidating checking, savings, investment, insurance, and other accounts at the same bank. Others offer cash incentives or higher interest rates to those who meet a certain threshold of net investment with the bank. This is free money, so it’s worth a call to your bank to find out if they offer such a program, or shop around for a bank that does.
8. Know your bank’s rules.
Some banks charge a fee after a certain number of transactions between checking, savings, and/or investment accounts per month, or cap the amount of money that can be transferred in a single transaction or 24-hour period. Know your financial institution’s rules, and plan accordingly.
9. Automate bills.
You can’t accrue wealth if you are always being hit by late fees. Keep the lights on, and save yourself the cost of all those stamps, by automating as many payments as you can. Once you have a cash-rewards credit card, paying bills from your card can increase your benefits even more.
Want to save more money? Check out these 55 Practical Ways to Save Money Efficiently.
Featured photo credit: 401(k) 2012 via flickr.com