Saving money for the future isn’t front of mind for most people. It’s not nearly as glamorous as trading in for a new car or going on a fancy vacation. Whether you need to save for a specific future purchase or you’re building up an emergency balance, here are a few strategies to automate your savings without feeling the pain in the short term.

Set Up Automatic Transfers From Your Checking Account

Most banks and credit unions with sophisticated online portals will let you schedule transfers between your accounts. It’s easy to forget to make those transfers manually on a regular basis, so scheduling takes human error out of the equation. Just make sure to have enough money in the source account to avoid overdrafting while you automate your savings.

Direct Deposit Some of Every Paycheck

In a way, this is like scheduling your transfers straight from the source. Tell your employer (or whoever would be directly depositing money into your accounts) to take what they were going to pay you, deposit the savings amount directly into your savings account, and deposit the remainder in your checking or other main account. There’s a layer of accountability in this strategy. Some employers make you fill out a form and wait a few pay cycles before changes to direct deposits take effect. Once you’ve updated what amounts go to which accounts, it’s more of a hassle to undo it, making you more likely to stick to this strategy.

Make Sure You’re Using the Best Possible Accounts

Initial savings accounts that banks require you to create in order to join will likely have very minimal savings rates (like fractions of pennies on the dollar per year). Looking into what establishments offer the best savings accounts before you join will help you get the most bang for your buck while also avoiding hits to your credit score by opening a bunch of new accounts along the way.

So how do you know what accounts will be worthwhile? Start by checking online resources like Nerd Wallet. They offer great comparisons for financial accounts of all kinds (banks, credit cards, etc.). http://depositaccounts.com and http://bankrate.com are other places specific to bank accounts.Contribute to a 401k

Having a 401k, typically employer sponsored, is basically like the direct deposit tip above, but with tax benefits. Any money you take out of your paycheck to put toward a traditional 401k is left out of your taxable income. You won’t have to pay taxes on that money until you withdraw from the account. If you’re lucky, your employer might match your contribution up to a certain amount. Most commonly this means if you put in 1% of your paycheck into a 401k, your company would contribute that amount as well as an added benefit for working there. The % matched varies by company, if offered at all.

401k’s hold you accountable to make sure you save until you’ve retired, or at least until you’ve reached a certain age (59.5 years as of 2023). Withdrawals before that age come with a penalty, so don’t put money you need in the short term into you’re 401k.

But it’s not just a bank account with interest. You can decide how much of your balance goes toward stocks, bonds, or other funds. You can also pick funds based on your target retirement year and those take risk into account to reallocate as necessary. For example, someone retiring next year probably wants a less risky portfolio, so they’ll have more bonds and less risky funds in their account. Someone retiring in 40 years will have more stocks in their portfolio because the risk of loss in the short term isn’t as problematic, and the reward of high growth potential over time is appealing.

Utilize an HSA

Another tax-smart payroll deduction is putting some of your paycheck toward a Health Savings Account (HSA). To contribute tax-free to an HSA, you need to be enrolled in a high deductible health insurance plan. HSAs are extra tax-smart because:

• Your contributions come from your pre-taxed earnings, lowering your taxable income
• A portion of the account balance can be invested similarly to a 401k, and all gains are tax-free.
• Unlike traditional 401ks, this is not a deferred tax benefit. As long as you use it on qualified medical expenses, withdrawals don’t incur taxes either

Once you have the account, you can contribute pre-tax earnings from your paycheck up to the annual limit set by the IRS. So it’s a great investment, but if you’re looking to invest more than that amount, look for additional savings options for the remainder of your goal.

Automatic Saving Services

Financial investment services like Acorns could be a great way to automate your savings without noticing its impact on your daily spending. Note: I don’t personally use this product or anything like it, but I see the potential for how much it could help some folks manage their savings.

The Round-Ups feature from Acorns allows you to round your transactions up to the nearest dollar by contributing the additional cents to a savings account. The idea is that over time, all of these little contributions will add up and grow with interest, leading to a savings you didn’t even know you were building!

---

None of these solutions need to be the only way you automate your savings. If you’ve got the wiggle room in your budget, try to save as much as you can now so you won’t be kicking yourself later.

Check out our other blog posts, and subscribe to get more blog posts right to your inbox! And don’t forget to follow us on Instagram!