Benefits of Automatic Deposits Into Savings

Everyone knows the importance of having a healthy savings account. Whether you’re gearing up for a big purchase like a house or car, want to put some money away for traveling, or want to make sure that you and your family are prepared for unplanned expenses or circumstances –saving regularly is the best way to reach your goals. However, saving is often the last thing we think of when budgeting or allocating a paycheck — that’s where automatic deposits come in.

What are the benefits of automated savings? Automatically depositing a percentage or set amount of money into a savings account can make your money work for you, help level up your savings habits and help you reach your financial goals faster, all without any extra effort on your part. 

Ensure Consistent Growth

Consistency is key to both creating good saving habits and making your money work for you. While it can feel more rewarding to wait until you have a decent chunk of money to put into savings, consistent deposits will help your money grow faster in the long run. Even if you can only commit to saving what you feel is a small amount of each paycheck, taking advantage of compounding interest by choosing the right account can add up to significant growth over time. 

Where Do I Save? 

While putting money aside in a regular savings account is better than nothing and is often a good first step, those types of accounts often won’t even keep up with the rate of inflation. To get the most out of your savings, choose a high yield savings account or something similar to keep your money working for you while you continue saving. A DCU high yield savings account requires no minimum to open and doesn’t charge a monthly fee while still ensuring a higher annual percentage yield than regular savings accounts. 

Automatic Deposits Are Easier 

Manually transferring your money into savings can be stressful to remember, and there’s always a temptation to hold something back — even if you budget for saving. Having that extra cash on hand can feel necessary for an upcoming night out, shopping trip, vacation or the comfort of having a little more money in your checking account. However, more often than not, these types of concerns are merely points of resistance that can keep you from achieving your savings goals.

Instead of drawing on willpower to make sure the money you want to save actually ends up in your savings account, take advantage of the benefits of saving automatically and remove the mental hurdles while keeping your savings on track.

Want to learn how much you should be saving? Check out DCU’s savings goal calculator.

Build Better Financial Habits

Saving automatically doesn’t just build your savings practice, it can also help benefit your overall financial habits. Since you will have less money in your checking account, you will naturally have to start becoming more mindful of what you are spending money on. This can help you reduce frivolous spending and, perhaps most importantly, stay within budgetary limits. 

Set Up Automatic Payments 

If you already have a savings plan included in your budget, you’re nearly at the finish line of setting up an automatic deposit into your savings account. The last step is to update the settings of your account for automatic deposits, including the amount and frequency you prefer. This is valuable even if you can only budget a small amount to be deposited from every paycheck — consistency is key when it comes to saving.

If you are just starting out and don’t have a budget that includes a set amount for saving, it’s easy to get started!

1. Find a few areas to reduce your spending — such as eating out, unused subscriptions or entertainment.
2. Designate that extra money to savings and adjust however you track your budget accordingly.
3. Open an account, like a high yield savings account, to store your newfound savings.
4. Be sure the automatic savings function is set up correctly when you open the account so it doesn’t get forgotten. 

Even though one of the main benefits of saving automatically is the ability to not have to remember or think too often about your savings, it is still important to check in from time to time to take stock of how your money is doing. This will also help you have a good idea of where you are financially both in terms of your goals and in case of any unexpected life events. 

Reach Your Goals Sooner

It doesn’t take much to save more, whether you want to save for a new car or retirement. Setting up an automatic deposit into a savings account gives you the benefits of simplicity and consistency all at once. It also offers flexibility so you can increase or decrease the amount you’re saving depending on your circumstances.

When you’re ready to set up automatic savings, check out DCU’s variety of savings accounts — you’ll be sure to find an option that fits your budget and savings goals.

*The national average annual percentage yield ("APY") for savings accounts is updated monthly, please refer to the Federal Deposit Insurance Corporation.

Please note, membership is required to open a DCU savings account. Visit our membership eligibility page for more information. This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.