When you’re just starting to save, it can seem like an eternity before you see your savings account actually growing to a strong number. It’s easy to get discouraged by this slow-growing process. And of course you want to boost your savings as soon as possible. I have a little saying about this:
The savings of a thousand dollars begins with one saved.
I know it’s corny, but it keeps me motivated even when I feel like it will take an eternity to become debt free.
This quick trick is a simple, 10 minute task to begin increasing your savings. These three simple words helped to grow my savings (and pay off some debt) using only 10 minutes of time. The trick is to create an automatic savings plan.
Why It Works
The human brain is a strange organ. If your brain is anything like my brain, you can remember song lyrics from 1997 but you can’t remember the due date for your water bill. This is the genius of automation. You can automate your bills (auto-pay) to come out of your account on due date and you can automate how and when you save money (automatic savings plan). Automatic savings plans are the easiest way to tricking yourself into saving money. This approach works for multiple reasons:
- You save money with almost no effort.
- You treat saving money as a bill.
- If you schedule it to come out on payday, you never even miss it (because you never saw it).
- If you use an external account, you don’t see it when you log in to your primary accounts and aren’t tempted to raid your stash.
I’ve been using an automatic savings plan since I was 20 and it was one of the best decisions I’ve ever made.
How to Get Started:
First, you need to open a new savings account somewhere outside of where you normally bank. I use a local credit union and use Capital One 360 as my external savings account. I highly recommend Capital One 360 because of the high interest rate (.75%) and ease of use. They even have a nifty little feature called “Automatic Savings Plan!”
Second, you’ll need to schedule your reoccurring deposits. You can select whatever frequency works best for you: weekly, every other week, twice a month, monthly, etc. I choose to do weekly deposits of smaller amounts so I don’t feel like I’m missing money and I save more throughout the week. Weekly or every other week deposits maximize your savings, as you’ll make additional deposits within a year.
Here’s an example of the difference in $50 weekly versus $200 monthly:
Weekly Deposits: 52
$50 x 52 = $2,600
Bi-Weekly Deposits: 26
$100 x 26 = $2,600
Twice Monthly Deposits: 24
$100 x 24 = $2,400
Monthly Deposits: 12
$200 x 12 = $2,400
- If you’re new to an automatic savings plan, I’ve found it’s better to choose a smaller amount to deposit to begin and increase the amount over time.
- Read up on transfer fees for external accounts.
- Be aware of any holding times if you need to access this money.
- Schedule deposits weekly or every other week to maximize your savings.
- Have fun with it!
Now that you’re figured out how you want to save, sit back and forget it happened.
*This post contains affiliate/referral links. If you elect to open an account through my referral link, I may be compensated at no additional cost to you.
Do you have automated savings?