How to Create an Automatic Savings Strategy

If you want to secure your financial future, an automatic savings strategy could help. Automatic savings helps you consistently set aside money without lifting a finger. You can automate your savings and maximize your retirement fund through specific strategies and apps. It can be an easy way to grow your savings without the risk of other strategies.

For help creating the right automatic savings strategy for your financial needs, consider working with a financial advisor.

What Is an Automatic Savings Strategy?

Automatic savings is a convenient and effective method of consistently setting aside money without requiring regular manual deposits. You can instruct your bank to transfer a predetermined amount from your checking account to a separate savings account or investment vehicle at regular intervals. For example, your automatic savings function might send $100 from your checking account to a high-yield savings account every two weeks.

Benefits of an Automatic Savings Strategy

Automatic savings offers several notable benefits for your financial wellness.

Consistency: One of the critical advantages of automatic savings is that it promotes consistency in saving. By setting up regular transfers, you establish a disciplined saving habit. This way, your savings account grows, regardless of any market downturns or changes in your financial circumstances. In other words, automatic savings is a way to pay yourself first and budget the rest of your money for monthly expenses.
Ease and convenience: Automatic savings require minimal effort and maximal reward. Once you set the initial instructions, the system takes care of the rest. In other words, you don’t need to remember to transfer funds or worry about missing saving opportunities manually.
Goal achievement: Automatic savings can help you work towards specific financial goals. Whether you are saving for a down payment, dream vacation or emergency fund, automatic transfers ensure that you consistently contribute towards those goals. By breaking down your goals into manageable increments and automating the savings process, you make progress over time without feeling overwhelmed.
Financial security: Building a savings cushion through automatic savings provides a safety net in case of unexpected expenses or emergencies. Having readily accessible savings can help you cover unexpected medical bills, car repairs or temporary income disruptions without resorting to debt.
Investment opportunities: Automatic savings is a foundation for exponential financial growth. Once you accumulate a sufficient amount in your savings account, you can transfer those funds into investment vehicles such as stocks, bonds, mutual funds or retirement accounts. Automating these transfers ensures you consistently invest and grow your wealth over time.
Avoiding impulsive spending: By separating your savings from your checking account, automatic savings help mitigate the temptation to spend impulsively. When funds automatically flow to a separate savings account, they aren’t available for day-to-day spending. This distinction encourages better financial decision-making and reduces the likelihood of depleting your savings on unnecessary purchases.

Steps to Creating an Automatic Savings Strategy

Two advisors discuss automatic savings strategies.

These steps can help you create a sustainable automatic savings strategy.

1. Identify Your Financial Goals

Start by clarifying your financial goals. For example, you can build an emergency fund, save for a down payment or plan for retirement. By clearly defining your goals and the amount of money you need to save to reach them, you will determine how much you should save and for how long.

2. Determine Your Plan’s Longevity

Decide how long you will continue the automatic savings plan. It could be a short-term plan to reach a specific savings goal or a long-term strategy for ongoing savings and wealth accumulation.

This duration will depend on your goals, timeline and financial circumstances. For example, you could set an automated savings pattern to expire in six months if you are saving for a vacation.

3. Create a Budget

Making a budget is essential to understand your income, expenses and how much you can realistically save. Evaluate your monthly income and track your expenses to identify areas where you can cut back or optimize spending. Allocate a portion of your income towards savings while considering your financial goals and priorities. This way, your automatic savings deposit will leave you with enough to afford the essentials.

4. Select a Savings Vehicle

Consider the best savings vehicle for your goals and risk tolerance. Common options include a traditional savings account, high-yield savings account, money market account or certificates of deposit (CDs). Likewise, you can invest in an individual retirement account (IRA) or brokerage account.

Each option has different benefits and considerations. Therefore, it is critical that you choose the right one that aligns with your goals and provides the desired level of accessibility with potential returns.

Remember, automating your savings deposit to your employer-sponsored 401(k) is an excellent way to boost your retirement savings. Because most employers offer a 401(k) match, automated deposits will ensure you maximize the matching contributions from your employer.

5. Set Up an Automatic Savings Schedule

Contact your bank or financial institution to set up an automatic transfer between your checking account and your chosen savings vehicle. When doing so, you will specify the amount to save and the frequency of the transfers (e.g., weekly, biweekly, monthly). It is recommended that transfers align with your payday or whenever you receive regular income. Remember, automating the process ensures your savings grow consistently without requiring constant manual intervention.

6. Review Your Financial Status Each Month

Income, expenses and financial obligations change over time. So, it’s best to regularly review your budget, track your expenditures and assess your progress toward savings goals. Use this monthly review to ensure that your savings vehicle is growing as expected and make any necessary adjustments to your spending or saving habits.

7. Modify Your Strategy When Necessary

Be open to modifying your automatic savings strategy as needed. Life circumstances change, and your financial goals may evolve. Adjust your savings amount, frequency or even your chosen savings vehicle if they better align with your current situation. Revisit your goals periodically to ensure they remain relevant, and change your strategy accordingly.

What Tools and Apps Can Help You Automate Savings?

Most banks and credit unions let you set up recurring transfers from your checking account to a savings account. You can usually choose the amount and frequency — such as weekly, biweekly or monthly — to match your income schedule. Some banks also offer round-up savings, which automatically round up your purchases and move the extra cents to savings.

Several mobile apps are designed to help you save money automatically. Apps like Digit and Qapital analyze your spending and move small amounts of money into savings without affecting your budget. Acorns rounds up your purchases and invests the spare change, which can help you grow your money over time. Chime offers automatic transfers to savings and early direct deposit features that can give you more control over your cash flow.

These tools are helpful because they remove the need to think about saving. Once set up, they work in the background, helping you build savings over time. Many also include savings goals or alerts to keep you on track and show your progress. You do not need to do much once everything is in place, which makes it easier to stay consistent.

When choosing a tool or mobile app, look at the fees, how it connects to your bank and whether it fits your savings habits. Some tools charge monthly fees or require a minimum balance. Others are free but may offer fewer features. Pick a tool that fits your budget and makes it simple to reach your goals without needing constant attention.

Bottom Line

An advisor demonstrating the benefits of an automatic savings strategy.

Automatic savings is a powerful tool for achieving financial stability and reaching your goals. By automating the process, you establish a consistent saving habit, benefit from ease and convenience and increase your chances of financial security. By following the steps to create an automatic savings strategy, you can embrace the power of automatic savings and take control of your financial journey.

Working with a financial advisor can help you streamline your financial goals and find the right accounts to grow your earnings.

Tips on Creating an Automatic Savings Strategy

If you’re having trouble setting a savings goal or finding the right financial institution, a financial advisor can help. From financial planning to in-depth market knowledge, professional resources can kickstart your progress and help you avoid costly mistakes. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Automating savings is a monumental financial step. Likewise, choosing a savings vehicle is vital to progressing toward your goal. Here’s how to know what kind of savings account you need.