How to build your savings with automated deposits.
Many of us are putting more money in the bank to protect our families in case of a job loss or other financial emergency. Now’s the time to build your savings. Automated savings deposits can help you do it gradually. There are three main types of savings you can build automatically:
A short-term cushion.
You should have $500 to $1,000 in your savings account for unexpected expenses you can’t postpone, like a car repair or a last-minute family trip. Can’t put this much away all at once? Set up automatic transfers from your checking account each month using online banking or by working with your banker directly. Make $50 monthly deposits for one year, and you’ll have $600.
Savings Tip #3
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A long-term emergency fund.
Many experts recommend putting six months’ worth of living expenses into a separate savings account to protect your family in case of a medical emergency or job loss. Sound impossible? Have a fixed amount, such as $100, deducted from your checking account each month and put into savings; you’ll be in better shape than if you didn’t save anything at all. You can set up automatic transfers from your checking to savings account through your online banking account. Add windfalls such as a tax refund, and your emergency fund will grow even faster.
Long-term savings.
These accounts will be used to fund big goals in the future, such as your retirement or your children’s college education. Some may seem far off now, but the earlier you start saving, the more time you will have for your money to appreciate.
- Retirement: One recent study found that retirees will need to save 126% of their ending workplace salary to maintain their standard of living, factoring in inflation and medical cost increases. Save automatically. If your employer offers a 401(k), you can usually arrange at work to have automatic deductions made from your pre-tax pay and direct deposited into a 401(k) plan you specify.
- College: Wondering how much to save for your children’s college education? Use the cost projector at FinAid.org. How do you set up specialized savings deferrals so they’re automatic? Fund 529 college savings plans with automated deposits deducted from your checking account.
Take action now.
To set up these three types of savings plans, go to your bank’s online banking Web site or visit a local branch, where a banker can assist you.
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