The Power of Saving Automatically

Automatic savings is a simple yet powerful tool that ensures you’re consistently working toward your financial goals, whether paying down debt, preparing for emergencies, or saving for long-term dreams. Let’s explore how automatic savings can help you prioritize your past, present, and future financial needs:

Save for the Past: Tackling Debt Consistently 

We believe that paying down debt is saving! It’s the first step toward financial freedom for many of us. Setting up automatic payments for loans or credit cards ensures that payments are made on time, helping you avoid late fees and reduce your overall balance. 

Take, for example, someone dealing with credit card debt after an unexpected car repair. By setting up automatic payments that allocated a percentage of their monthly savings goal to debt repayment, they were able to reduce their debt by $5,000 in just two years. 

This approach works because it removes the need to think about payments every month, allowing you to focus on other priorities while making steady progress. Automating your debt repayment makes it easier to stay consistent and stress-free. 

Practical Step: Set up automatic payments with your lender to ensure debt repayment stays on track. Start with as much as possible at the moment and adjust as your financial situation improves.  

Save for the Present: Building an Emergency Fund 

Life is unpredictable, and having an emergency fund is key to financial peace of mind. Automating your contributions to a savings account ensures you’re consistently setting money aside for unexpected expenses. 

For instance, imagine someone who earns an irregular income but decides to set up an automatic transfer of just $10 a week to an emergency fund. Over the course of a year, they’ve saved $520—enough to handle unexpected expenses like a car repair or medical bill without turning to credit cards. Even with a modest amount, the consistency of automatic transfers ensures their savings steadily grow, providing peace of mind and financial stability.  

Practical Step: Open a savings account and set up a recurring transfer - even small amounts, like $10 or $20 a week, can add up over time. (remember, start small - think BIG!)  

Save for the Future: Securing Long-Term Goals 

Whether you’re preparing for retirement, saving for a down payment on a home, or planning for your child’s education, automatic savings helps you stay committed to those long-term goals. 

Consider a couple wanting to buy their first home. By setting up automatic deposits into a joint savings account and allocating a portion of their savings goal to this effort consistently, they were able to save   enough for a down payment and cover their moving expenses in just three years.  

Automating their savings made it easier to stay on track, even during months with unexpected expenses. Watching their savings grow provided the motivation to stick to their plan and achieve their dream of homeownership. 

Practical Step: Check if your employer offers a split direct deposit option. Allocate part of your monthly savings to a retirement account (like an employer sponsored 401K or an IRA), house fund, or another long-term savings account, ensuring consistent progress toward your future.

Why Saving Automatically Works 

Automatic savings simplifies the process of building financial security. Here’s why it’s so effective: 

• Consistency: Regular contributions build habits and ensure progress toward goals. 
• Discipline: Automation removes the temptation to spend money before saving. 
• Convenience: Once set up, saving happens effortlessly. 

Take Action: How to Set Up Automatic Savings 

Ready to harness the power of automatic savings? Here’s how to get started: 

Identify Your Goals: Are you paying off debt, building an emergency fund, or saving for retirement?

Choose Your Savings Method: 

• Bank Transfers: Set up recurring transfers to an emergency fund savings account and any debts you’re repaying.  
• Employer Direct Deposit: Ask your employer to split your paycheck between checking and savings. 
• Retirement Contributions: Enroll in your employer’s retirement plan or set up an IRA with automatic contributions. 

Start Small and Scale Up: If you’re unsure where to start, begin with as little as $10 a week. Even on a tight budget, small amounts saved regularly add up. Automated transfers make saving predictable and consistent, keeping your financial goals moving forward without needing constant attention. Adjust as your financial situation improves. 

Track Your Progress: Regularly check your accounts to celebrate milestones and stay motivated. 

Start Saving Automatically Today 

Automatic savings is the easiest and most effective way to build a solid financial foundation. Whether you’re addressing your past, securing your present, or planning for your future, automation ensures you’re always moving closer to your goals. 

How to Save Automatically

Automatic savings means you have a process in place to save at regular intervals, whether that’s monthly, weekly, or daily. There are two modes to save automatically: digital and analog.

If you want to save automatically, we suggest one of these three strategies:

• Instruct your employer to direct a certain amount from your paycheck each pay period and transfer it to a retirement or savings account (or both). [Direct Deposit] Traditionally, you can set this up using your employer’s direct deposit. Ask your HR representative for more details and set this up today.
• Every payday, your bank or credit union transfers a fixed amount from your checking account to a savings or investment account. Talk to your local bank or credit union to set this up. [Digital Banking Automatic Transfers]
• Choose a day of the month or a regular interval, such as every 2 weeks, to transfer a set amount from your checking account to a savings vehicle. We particularly recommend this method for people with inconsistent income or those who access their pay frequently. Consider picking a lower dollar amount or a time of the month when many other automatic payments aren’t happening. Set this up with your bank or credit union.

Intimidated by digital automatic savings? Save automatically—the analog way:

• Save your loose change. Every day, put all of the loose change from your pocket or purse into a jar, and don’t spend it. If that jar starts to look tempting, take it to your bank or credit union once a month to cash and deposit into a savings account. However, if you’ve got a big jar: there’s no harm in watching your automatic savings pile up- literally!

Why Automatic Savings Works

Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded. Soon you will be able to cover many unexpected expenses without putting them on your credit card or taking out a high-cost loan.

I Don’t Have enough Money to Save

If you’re still in the portion of your savings journey where you’re reducing debt (which is saving), then visit our resources to get out of debt.

Once you’ve reduced your debt, everyone has the ability to start to save up. At America Saves, we say “Start Small, Think Big.” You can start with only a small amount, and you can save daily, weekly, or monthly. Over time, your deposits will add up. Even small amounts of savings can help you in the future.

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The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.