Let's face it, managing money can feel like a rollercoaster ride — especially with all the bills, unexpected expenses, and those must-have splurges. For young professionals in their 20s and 30s, setting aside money consistently might seem daunting. But what if you could save money without even thinking about it? That's where automatic savings plans come into play, and at Synchrony, we're all about making your money work for you in the smartest, most hassle-free ways possible.
What’s an Automatic Savings Plan?
Think of an automatic savings plan as your financial buddy who quietly tucks away a bit of your cash from your checking account to your savings account on the regular—be it biweekly or monthly. It’s all about setting it and forgetting it. This way, you dodge those mental blocks or "I'll do it later" moments that often come with manual saving.
The Real Deal: Why Automate Your Savings?
Melanie Lockert, a pro financial writer from LA and the brain behind Dear Debt, swears by automatic savings. She managed to ditch a mountain of student loan debt with this tactic.
“When I was in my early 20s and working my first full-time job, I just started saving a hundred bucks a week,” Lockert says of her first use of automatic transfers. “I didn’t look at the balance until a year later, and it had already amounted to several thousand dollars.” Seeing your money grow without actually having to do anything—without, as Lockert says, “feeling the pain of saving"—can be really beneficial.
Who Should Consider an Automatic Savings Plan?
Anyone looking to build or boost their savings routine can benefit from automating their savings. It ensures that saving becomes an integral, effortless part of your financial life.
This is especially true for those early in their career - early career savings contribute to compound interest, meaning the earlier you save, the more your money grows over time.
This is particularly beneficial for long-term goals like retirement or buying a home. Additionally, establishing savings habits early creates financial discipline that can help navigate future financial challenges more effectively.
Going automatic makes saving money a part of your financial routine, and with money being out of sight before you can spend it, there’s less temptation to spend.
Choosing the Right Savings Account
First up, figure out how much cash you can spare and how often. Lockert advises that you understand your income and expenses to figure out how much you can save each month.
If you haven’t got a budget yet, now’s a great time to whip one up with a focus on saving. Trust us, it’s a game-changer.
Types of Automatic Saving
There are two main ways to automate your savings:
1. Account Transfers: Link a savings account to your checking account for automatic, recurring transfers. Easy peasy if you have both checking and savings accounts at the same bank.
2. Direct Deposits: Perfect for those with a regular paycheck or the self-employed heroes. Set a part of your income to go straight into savings.
For freelancers or those with fluctuating incomes, consider setting transfer timings that match your cash flow, like quarterly. Saving at a financial institution different from your daily bank can also help mentally separate spending from saving. And hey, why not look into high-yield savings accounts at other banks? They offer better interest rates, meaning your money grows faster.
Setting Up Your Automatic Savings Plan
To get started, follow these steps:
1. Determine the Amount and Frequency: Decide how much and how often you want to transfer money to your savings account. This could be a percentage of your paycheck or a fixed amount.
2. Choose Your Banks: You can keep both your checking and savings accounts at the same bank or opt for a different bank that might offer higher interest rates or lower fees.
3. Set Up the Transfer: Link your savings account to your checking account for automatic, recurring transfers. Alternatively, arrange for a portion of your paycheck to go directly into your savings account, which can also be set up for IRAs.
Keep Your Financial Health in Check
Even though an automatic savings plan runs itself, it’s smart to check in on your finances now and then. This is crucial if your cash flow changes. Regular check-ups help you tweak your savings and keep your financial goals on track.
Can Automatic Savings Plans Level Up Your Financial Goals?
100% Yes! Whether it’s for an emergency fund, retirement, or that epic trip, automatic savings plans put saving first and simplify the whole process. Consider splitting your savings into different accounts for different goals. Melanie Lockert suggests naming these accounts to keep you motivated and on point.
Unlocking the Potential of Automatic Savings
An automatic savings plan isn't just a tool—it's a cornerstone of smart financial management. It embodies Synchrony's vision of making every ambition achievable and supports you in maximizing your earnings. By automating your savings, you're proactively securing your financial future and actively pursuing your goals.
Discover more strategies for saving effectively. Your financial well-being is Synchrony’s priority, and we're here to help you make the most of your financial resources.
Julie Anne Russell is a Brooklyn-based freelance journalist. She writes on personal finance, small business, travel and more.
READ MORE: Saving For the Unexpected
Need to make a payment?
Use the Log In button to find your account login
portal.