5 Ways To Grow Your Savings With Automatic Transfers

We all know the importance of saving money, but life’s daily demands can make it challenging to consistently set aside funds.

If you have the funds to set aside but have trouble remembering to do it, technology has come to the rescue with an innovative solution: automatic transfers. Using automation, you can grow your savings and gain ground on your financial goals. Many banks provide automatic transfer features with their accounts — or, you could download a savings app and link your bank account to take advantage of this tool.

How do automatic savings account transfers work?

When you automate your savings, you’re earmarking a specific amount of money to be automatically deposited into a savings account. These deposits take place at specified intervals such as weekly, biweekly , with the case of “round-up” savings features, with every debit card transaction. 

Once automatic savings account transfers are established, there is nothing else you need to do to make the transfers occur moving forward. 

Here are five ways you can use automatic transfers to ensure that your savings continue to grow without much management on your part.

1. Direct deposit split

A simple way to start saving automatically is by setting up a direct deposit split for your paychecks. Direct deposit split allocates a portion of your paycheck directly into a savings account while the rest of your funds hit your main checking account.

You can typically designate a specified percentage or amount to be allocated for each direct deposit. For example, if your paycheck is $3,000, you could designate 10 percent ($300) to be automatically transferred to a savings account.

2. Recurring savings transfers

Many bank accounts come with the option to schedule automatic transfers at predetermined intervals, such as weekly, biweekly or monthly. These transfers can be customized to fit your budget and savings objectives.

Consider setting up a recurring transfer to coincide with your payday to ensure that a fixed amount is automatically moved to your savings account. For instance, you could schedule a transfer of $100 from checking to savings every payday.

3. Round-up savings

Round-up savings programs allow you to automatically round up your debit card purchases to the nearest dollar amount or an amount of your choice. The difference between the actual purchase price and the rounded-up amount is then transferred to your savings account.

At Ally Bank, for example, your change gets rounded up and then automatically transferred into a savings account once you’ve accumulated at least $5.

4. Goal-based transfers

By setting up automatic transfers specifically tailored to each of your savings goals, you can ensure that your savings align with your specific objectives. These goals might include building an emergency savings fund, saving for a down payment on a house or funding your child’s education.

While it can be helpful to have multiple savings accounts for different savings priorities, you also may be able to set up specified savings categories, or “buckets,” within a single savings account. Then, you can determine how much you want to contribute to each goal and set up automatic transfers into the designated category, tracking your progress along the way.

Huntington Bank’s Savings Goal Getter is one example of a goal-based automatic savings tool. It allows customers to create different savings goals and contribute to each goal on a regular basis.

5. Investing spare change

Several mobile apps offer micro-investing features that allow you to invest spare change from your everyday purchases. These apps link to your checking account, track your transactions and round up each purchase to the nearest dollar, automatically investing the difference in a diversified portfolio.

These investment options spread your funds across a range of securities, such as stocks and bonds, which can help reduce risk but market fluctuations can still affect the value of your investments.

Acorns, Stash and Betterment are a few investing apps that offer automated micro-investing features.

The benefits of automatic savings transfers

Establishing automatic savings can have a variety of positive impacts including:

• Creating a savings habit. When you “set it and forget it,” the money automatically gets set aside each month. Meaning, there’s no opportunity for you to forget to set the money aside yourself if you get busy or other competing financial needs arise.
• Strengthening good financial management. Automating your savings requires learning to manage and budget your remaining funds and can help you reign in unnecessary spending.
• Consistent savings growth. Consistently making deposits month after month allows you to realize the true power of saving, including compound interest. The effects of compound interest, which is interest paid on both the principal and the interest you’ve already earned, can put your savings on the fast track.

Bottom line

Incorporating automatic transfers into your financial routine can be a game-changer when it comes to saving money consistently. Regularly contributing to savings is crucial for achieving financial stability, reaching long-term goals and protecting your finances against a potential recession. Having technology do that for you makes it all the easier.

Research savings accounts that come with the digital offerings you’re interested in, and make sure you’re earning a decent savings yield to make your money grow.