Apr 03 2008

Are you an ‘automatic’ saver?

This news story suggests that when it comes to putting away money for savings or investing, it may be better for some people to automate the process.

If money is automatically deducted from your paycheck and deposited into a savings, retirement, or investment account, the logic is that you won’t miss the money, and you’ll be better off, since you’ll have more in savings.

I think there’s merit to that, especially if you make adjustments to increase your automatic savings every time you have a pay raise.

For me, I enjoy manually taking money from one account and putting it in the emergency fund.

But, I also appreciate the “discipline” an automatic transfer can have on a person’s financial situation.

Whenever my husband gets his next raise, I hope we can be disciplined enough to increase retirement and savings contributions, without increasing our standard of living to the same degree.

What about you? Do you save automatically? Or do you prefer manually transfering the funds?



18 Responses to “Are you an ‘automatic’ saver?”

  1. I love automatic savings!! I opened up an ING account at the end of January to have a travel fund, and set it up where $15 is automatically transferred from my Bank of America checking account to the ING once a week. It’s a small enough amount that I don’t miss it week to week, but by the end of the month, that’s $60 I’ve put in there without any effort! And I usually always try to transfer at least $100 at the start of every month when I get my paycheck, and occasionally more if I’m under-budget. I’ve already saved up almost $900 and am really proud of myself — I’ve never saved up money that fast before. The automatic transfers are a huge part of it, but I read a post on a Penny Saved by Jesse the other day saying that another reason why it’s so easy to save with a separate bank is because the money is “hidden.” All my other money is with Bank of America, so I never even think of the possibility of borrowing from my ING. Plus, the transfer takes a few days, so it’s not as liquid to me. I am incredibly happy I started the account — it’s going to majorly help fund a Europe trip this summer!

  2. My employer lets me direct deposit my paycheck into multiple accounts, so I direct deposit a fixed amount every month into two different savings account (one for big savings–emergency fund, wedding, travel) and one for little savings (car insurance payment, paid twice a year). In addition, I do some manual savings by basically zeroing out my checking account just before I get the next paycheck. Aside from a little cushion I leave behing, anything I haven’t spent goes to savings.

    Sometimes it’s a pain to only get paid once a month, but it also means I only have to do bills and transfers once a month, too.

  3. We had an automatic transfer set up, but the problem was that it was too easy to transfer it back. Or forget to write down the draft! We stopped it and now try to save extra money made by selling crafts, etc. You are doing great with your emergency fund savings! Good for you!

  4. I have everything deposited into my three bank accounts via direct deposit. From there, I then either transfer it to the appropriate spots (retirement, extra savings and such).

    I enjoy sending the little transfers into retirement or the emergency fund but having the set amount deposited into the proper place straight out of my pay keeps my balance sheets nice and tiddy.

  5. When I get raises, I try to put the entire raise into my retirement account through my existing payroll deductions. (it actually goes into a supplemental account in a 403b plan) Thus my net pay stays the same, I’m living happily, and my retirement account is getting a big boost. The big benefit: my spending habits don’t increase either!

    Tim

  6. It seems I am just like DebbieJ. I have the keep the change program at my Bank of America, but it is just too easy to transfer that money back. I am trying to get us (started) out of credit card debt then I plan on joining my works 401 and set up an “off-site” savings so I don’t dip into it and set up and emergency fund.

  7. We have a set amount transfer every week to out ING account. It works great for us since we don’t need to remember to log in every week. When we can we raise the amount that’s transferred.

  8. We just started doing this a couple of months ago. It works well for us and we really do go without missing it much.

  9. I’m a manual type. We save a percentage of our income and that changes with each payperiod. Plus I like the control I get with it and moving money into savings is the only “fun” bill to pay. Automating works for a lot of people but it doesn’t for me.

  10. We try to do both — we have automatic savings that also get automatically invested into the stock market, and we set aside savings “manually.” Those kind of pile up in a high-yield savings account (or at least hopefully they pile up!) — and occasionally we’ll take that and also invest it.

    I’m a pretty big fan of automatic saving/investing overall though — it’d be my #1 “tip.” :-)

  11. I don’t do it automatically, but I usually do it on every payday, putting aside about 50-60% of it to a saving account!

  12. I do mine manually. I find it drives my motivation. I fund most of the savings from money I get here and there, so it’s nice to feel that my efforts to get that money is going to greater causes.

  13. yes i like this plan i do it in manual way due to the way i got my money company force to withdraw by credit card so i withdraw it and put in saving accounts with daily fee excellent way for me glad you mention it

  14. We have an employee share purchase scheme at work, so I get a % of my pay deducted to buy stocks in the company – basically a few thousand dollars a year. By taking it out before I get it, I don’t miss it from month to month … and if I needed the cash I just sell the stocks.

    Ian’s last blog post..Swimming Australia acting like a nanny to swim team

  15. I do a little of both. I have an automatic transfer every week when I get paid into my high-yield savings account (Capitol One). It’s small enough that I don’t “miss it.” Then, any extras I can pull from my budget each week I transfer on top of that. Whenever I meet my savings goal I stop the automatic transfer and use that amount for extra debt repayment. If I have to dip into the savings for some reason, I start the automatic transfers up again until my goal (I like to have $1500 in there at all times) is met.

  16. I appreciate your advice. This is something we really have to start doing.

  17. I do both. Hubby and I have money taken out automatically to savings from the paychecks and I don’t consider it part of my monthly salary because I never really ‘see’ it even though I know it’s there if I needed it.

    But we also take whatever is left after bills and groceries to put into the various other savings accounts (vacation, house, furniture, gifts, emergency, etc.). And I do like allocation the money to the different accounts. :) Like I’m paying myself.

    castocreations’s last blog post..Look Ma! I CAN Cook!

  18. This is a great philosophy and I definetly follow it. Automatic savings go into my 401K and to Roth 401K. I am also starting to invest in a Vanguard mutual fund – I am putting my post together on this right now at http://www.savingtoinvest.com – so this article is very timely. I’ll include a link back to it.

    Andy.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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