Automatic Savings: The Way to Stop Worrying About It
Article revised on 18 December 2017
Do you remember my last article on the importance of saving? Are you now convinced that it is indeed important but you’re still not sure how to do it on a daily basis? I have a solution for you: automatic savings.
What does it mean to automate your savings? Simply put, it means programming a deposit into a savings account that will kick in automatically on a set date based on the frequency you determine.
All the tools that allow you to automate your savings exist. It’s easier than ever to save! As I explain in my book “Boxers, nouilles chinoises et finances” (available in French only), you must learn to first pay yourself.
Every two weeks, on pay day, you can program a periodic deposit into a savings account. You will have saved more than you thought before you know it! It will be much easier to save for your retirement this way, or for a vacation, or even to create an emergency fund. The amount you transfer should be based on your savings goals (why you’re doing it), your savings projections (for when) and above all, your actual savings capacity.
Having a virtual account
These days, you can open a savings account online. There are many advantages to having an online account.
You may find that you don’t have easy access to your money like you do with your current bank account, and that’s a good thing. You don’t want your savings account to be as accessible as your chequing account. You want to avoid the temptation of dipping into your savings account for everyday expenses and undermine your savings efforts.
With this kind of online account, you can divide your savings by project, and put a little money aside for several of them at a time.
Some employers offer the option of making contributions to a savings account through payroll deduction. You can place your money in a TFSA or RRSP, for example. A specific amount is deducted straight from your pay and transferred to a savings account. You just set it and forget it. It’s worth your while to learn more on the subject.
Just like your budget, your savings don’t have to be set in stone. Every time you review your budget, you can rethink your priorities and reset the amounts you would like to set aside for certain projects. This can be especially helpful if you complete a project earlier than expected or if life throws you an unexpected curve ball and you have to put one of them on hold for a while.
All right, it’s time I let you go set up an automatic deposit into your savings account!
Start saving now!