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The Advantage of Automation in Savings
In today’s fast-paced world, it is easy to overlook the importance of maintaining your savings accounts. When funds linger in your checking account, the temptation to spend impulsively increases. If you’ve ever wished for a “set it and forget it” method for saving, you’re in for a treat: automation simplifies the process of boosting your savings accounts.
Why Financial Experts Advocate Automation
Many financial advisors endorse automation, and for good reason. This strategy allows you to systematically direct money toward savings and investment accounts without the hassle of manual transfers. To maximize the benefits of automation, consider implementing specific tactics that can enhance its efficacy.
Insights from Financial Professionals
We consulted with James Gilliver, Chief of Operations at Unity Mutual, and Annie Ma, VP of Product and General Manager for Savings and Mobile at Oportun, to gain insights into the effectiveness of the automated “set it and forget it” strategy. According to Gilliver, while most individuals have good intentions to save, life’s distractions can quickly derail plans. Automation alleviates this concern by automating the savings process, making it seamless.
Overcoming the Fear of Losing Money
One common obstacle to saving is the perception that moving money from checking equates to losing it. Gilliver asserts that automation mitigates this feeling by transferring funds into savings before you even register the change. “You’re essentially paying yourself first, helping you stick to your savings goals without the daily awareness of the funds’ absence,” he explains.
Timing Your Automated Transfers
Once you’ve decided to automate your savings, the next question is when to initiate these transfers. Gilliver recommends timing them for immediately after payday, once essential expenses are covered. This ensures that savings contributions are prioritized without affecting your day-to-day budgeting.
Defining Your Savings Goals
Ma highlights that automation is most powerful when aligned with specific savings goals. Identifying short-, medium-, and long-term objectives enables you to allocate different amounts towards each goal effectively. Whether it’s covering living expenses for a few months, saving for a vacation, or planning for retirement, structuring your savings in “buckets” sets you on the right path.
Conclusion: Making Savings a Habit
Handling life’s various responsibilities can be overwhelming, but automation—your “set it and forget it” approach—simplifies the process of building savings. By automating your contributions, you not only make saving a consistent habit but also pave your way toward long-term wealth accumulation. Establishing this system is straightforward and one of the most effective strategies for achieving financial prosperity.
