In an era where you can do (almost) everything online, some people are choosing to automate their lives in almost every way, including saving money. With so many apps, online banks, and websites, it’s easy to think that automating your savings is a great choice. But is it?
Is Automating Your Savings Worth It?
This post has been written by our fabulous staff writer, Kimberly Studdard.
Below, you’ll find why automating your savings may be worth it, and also a few reasons why it may not be.
Makes Savings A Habit
The average American has less than $1,000 in savings. If you aren’t used to saving money, or if you find yourself spending your money as soon as you receive it, automating your savings can help foster healthy habits, as well as give you a bit of a nest egg should you need extra funds.
If you are used to saving money, automating your savings can still be a great tool for you, as it will help you save more than just the money you throw in every month (or paycheck).
You’ll Save Time
Who doesn’t love saving time? By automating your savings, you’re giving a little more time back in your day, week, or month by not having to worry about if you put enough away this paycheck. You get to pay yourself first, while not even thinking about it!
Plus, automating your savings means you can set up your savings however you’d like. Want to save money every week? You can set that up. What if you want to transfer $500 extra dollars to your savings every quarter? You can set that up too. You aren’t limited to how you save your money, and you won’t even have to think about it once you’ve gotten everything set up the first time.
You’ll Build Up Money Over Time
For those that aren’t used to having an emergency fund, or those who can’t imagine having extra money sitting around, automating your savings is a great thing. Not only will your money build up over time, but you won’t have to think twice about it.
You Can Save + Invest
What if you could save and invest your money, and not even think about it? With apps like Acorns, Betterment, Qapital, and more, you can save your change (or a set dollar amount), invest it, and have the option to pull out the money should you need it.
Options like these makes it easier for people, even those who are lower income or who don’t know how to invest yet. It’s a great option to get you used to investing while saving money, and having everything automated!
When Automating Your Savings Isn’t Worth It…
Now onto the possible cons of automating your savings…
You May Overdraft
If you are used to overdrafting your account, moving a lot of money around at all times, or if you’re someone who has a lot of different accounts for separate things, automating your savings may not be the best idea for you. If you automate your savings and then continually overdraft, it may end up costing you more money than you’re saving.
Now, you can continue automating your savings, even in an instance like this. However, instead of transferring a specific amount, I suggest using an app that allows you to save your change. For example, if you spend $3.20 on coffee or food, the app will then transfer $0.80 to your savings account. You’ll still be able to save, your banking info may look a little cleaner, and you won’t really have to worry about money being taken out that you didn’t already have.
You Shouldn’t Completely Ignore Your Finances
While automating your savings can be a good thing, that doesn’t mean you can just forget about checking on your account and budget regularly. Automating your savings should only be used as another tool to encourage saving more money and setting you up for success.
If you forget to:
- check your account,
- don’t adjust when your budget changes, or
- continue to take money out that you are trying to save…
…automating your savings isn’t going to work for you.
I love automating my savings, and I do use a few different apps to do it. However, you should always be in control of your own money, so it’s important to keep that in mind. Automating your savings should only be used as a way to gain, not a way to forget about your money.
Are you automating your savings?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.