Building a savings fund is the first step in the lifelong journey towards financial literacy. However, many people still find it challenging to save consistently. Experts recommend that individuals hold at least six months’ expenses in their savings, which is out of reach for many families today. One easy way to develop a savings habit is through savings automation.
Automated savings describes automatically transferring a certain amount of cash from one’s checking account into their target savings account regularly. In most cases, the transfers occur every month, which is beneficial for budget-planning purposes.
Virtually every bank offers automatic savings as a feature these days. To take advantage of this feature, the account holder must contact their bank to opt-in. If they don’t have a savings account, they will need to open one first. It’s helpful to set up the transfer a day or two after payday, so the money goes into savings before it gets spent.
Some banks also provide a service that automatically rounds up debit card purchases to the nearest dollar, depositing the difference into the account holder’s savings account. According to the experts at SoFi, “If you enable Roundups, each purchase on your SoFi Money debit card will be rounded up to the next whole dollar.”
Perhaps the most essential purpose of a savings account is to provide a financial buffer during times of hardship. Medical emergencies, sudden unemployment, or severe property damage are just some of life’s unexpected curveballs that can set a person back financially. A healthy savings fund keeps the setback as minor as possible.
Additionally, it’s possible to accrue interest in a savings account. While checking accounts are for holding money, savings are for growing money. For this reason, it’s pretty much in everybody’s best interest to contribute to their own savings accounts as much as possible.
Saving money can’t happen without budgeting and tracking. Sticking to a monthly budget helps people avoid unnecessary spending by first prioritizing the most critical expenses. This ensures they can regularly contribute to their savings and ultimately allows them to reach their goals.
Once a savings routine has been established, it’s vital to regularly self-monitor to track progress. Thanks to modern technology, that’s pretty easy to do these days. Some people achieve this by building spreadsheets, but there are even easier ways than that. For example, many banks already provide metrics and tools through their online banking portals. Multiple apps conveniently analyze spending and saving habits.
Being financially secure eliminates a tremendous amount of stress and limitations in one’s life. To build wealth, it’s important to make a habit of saving money first. Modern life can be very complicated and hectic, so it might be challenging to remember to save every month. Fortunately, it’s possible to “set it and forget it” with automated savings. These features and more are simplified at SoFI Invest (SoFi Bank).