We all want to save money but saving money regularly is difficult. Many times, we begin a savings plan, put in some initial money and then forget about it after a month or two. There is intent to save but we don’t give ourselves enough time to form a habit out of it.
A good way to combat this behaviour is to automate your savings. It will help erase the effort of manually transferring your money from one account to another and also serve as a useful tool in managing your money.
In this chapter, we will focus on understanding what is a savings account, how to automate your savings and how you can maximise the benefits of an automated savings plan.
What is a Savings Account?
A savings account is a safe way to save your money while earning an interest on the balanced maintained.
A savings account is a liquid account, meaning it allows cash to be withdrawn easily without any penalty. This makes it a safe place to park your savings such as your emergency fund, or savings for your gadget etc.
Most banks provide a high interest rate along with unlimited cash withdrawals and other benefits to prompt you to open a savings account with them.
But opening a savings account is only the first step in your savings journey. Most people find it difficult to keep contributing to a savings account and hence fall behind on their savings goals.
The good news is that automating your savings can be a great way to stay on course with your savings goals.
How to Create an Automatic Savings Plan
Creating an automatic savings plan is simple and helps you in the long run. You can schedule recurring deposits from your current account to a linked savings account every month. The amount and frequency of these recurring deposits can be based on your savings goals and preferences.
For example, if you get your salary at the end of every month then schedule a deposit on the 3rd or 4th of the next month so that you have enough time for your pay-check to be cleared.
More than the timing of the deposits, the consistency is more important in automated savings. The point is to transfer the money before you spend it on something else or worry about how to save. Automating your savings relieves you from much hassle and ensures that you stick to your saving plans.
Make the Most of Your Automatic Savings Plan
Automating your savings is one step in the right direction, but you also need to ensure that you are making the most of your savings strategy.
- Make sure that you don’t withdraw from your savings account until it is absolutely necessary
- Choose a high yield savings account, with minimal fee so that you can earn a good amount as interest on your savings
- Review your monthly budget regularly to see whether you can add more money to your savings
- Use the money you saved for your short-term and long-term financial goals
Putting your savings on autopilot can be quite a blessing for you in the long run. So the longer you stick to automating your savings, the more benefit you will reap. Remember, it is always easy to spend the money but equally difficult to save and grow it.
