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Money Systems That Lead to Success: Automatic Savings

A while back, I wrote about the opinions of Scott Adams on his eventual success as the creator of the comic strip Dilbert. I focused on the failure aspect of the article he wrote for the Wall Street Journal and I wanted to revisit the topic, as only touched lightly on the success factors. Specifically, I want to talk about systems — a methodical way of approaching any particular effort — as one of the core components of success.

A household uses systems all the time. For example, you may have a system for effective grocery shopping. Perhaps you keep a notepad and pen on the refrigerator, write down anything you need to purchase when stocks are low, and take the list with you on your shopping day. For the most part, this should prevent you from veering away from the list too much when you shop.

Or, you might have a different system for grocery shopping. You may schedule an automatic shipment of groceries to be delivered to you from every two weeks, each time with the same basic order.

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If you read shizennougyou regularly, it’s likely you have at least one system in place to improve your savings over the long-term. It’s a concept I’ve discussed many times in the past. And it’s such a basic piece of financial advice that you’ve no doubt heard of it even if you haven’t been reading my writing for long.

So, why automatic savings? And how can you set up this sort of system for your money? Let’s talk about that a bit today.

You must make your savings automatic.

By creating a system that handles your savings automatically, you eliminate or greatly reduce the chance of not reaching your goals. It’s a technique that someone at any income level can put into practice. Having a bank account (or an account at a credit union) makes it easier because financial institutions have technology that assists in this approach to money management.

Every once in a while, if you read about money management, you might come across a rule of thumb. “You should save 10 percent of your income” is one such common refrain. You can look at this either as a position to start or as a goal that might take some time to accomplish due to other factors. Even starting a savings system with 1 or 2 percent of your income is better than haphazardly setting money aside.

The point here isn’t setting your sights on a particular percentage. The point is to make a habit of savings, even if it’s only a few dollars a week. Luckily, there are plenty of easy ways to make that happen, including:

Direct deposit of your pay. The fewer hands that touch your money from the moment you receive it to the moment it is used, the better. Most modern employers offer direct deposit. Rather than receiving a paper check, you provide your banking information to the employer, and the company sends an electronic payment directly to your bank. In most cases, you receive your pay as much as a business day sooner, so you have the opportunity to pay bills or collect interest faster.

Today, about 82% of workers are paid through direct deposit. Luckily, that makes it easy to build savings. Often times with direct deposit, you can split your income between two or three different bank accounts. So you can have some percentage sent to your savings account before you even see your paycheck.

Even if you can’t sign up to split your check between accounts, moving your money straight to your checking account makes it easier to take advantage of the following options for automating your savings.

Automatic bank transfers. Almost every bank with which I’ve had an account — and that number is likely around forty — has some method of creating automatic transfers.

Let’s take my Wells Fargo account. When I sign in, the option to schedule an automatic transfer is one of the primary options in the menu. With income directly deposited into your checking account, and with a savings account earning at least a little bit of interest, you can create a savings system that you set once and forget about. After a few weeks of regular transfers (completed behind the scenes by the bank’s software), you won’t even notice the money isn’t in your checking account.

But a brick-and-mortar bank might not be the best option for savings. Sometimes your checking and savings accounts will be at two separate banks. In fact, often it’s better to separate these accounts so you can keep your savings in a bank that you’re not tempted to visit every day, like an online bank.

Related: The 4 Savings Accounts Everyone Should Have

Online banks often offer better interest rates, anyway. Over the last few years, the lines between online banks and brick and mortar banks have blurred. More traditional financial institutions are offering accounts you can only use online, for example.

The great part about many of these online banks, such as Capital One 360, is that you can link your online banking account with an account from another bank. You can then schedule automatic transfers to your online savings account, just like you would if your savings and checking accounts were with the same bank or credit union.

Value-added services. A few years ago, Bank of America introduced its “Keep The Change” program. When introduced, it was one of the first programs of its kind. Now, there are numerous banks doing the same thing, but they’re all a great hands-off savings option.

Here’s how it works: Every time you make a purchase with your debit card, the bank will round the transaction up to the nearest dollar and transfer the remainder into your Bank of America savings account. The bank’s savings account earns paltry interest compared to some other banks, but this systematic savings could still be substantial.

It’s like the old coin jar at home. At the end of the day, when you used to take the change out of your pocket and place it in your coin jar, saving your remainders. Since more people have moved away from cash transactions and started exclusively using plastic — credit cards and debit cards — the coin jar doesn’t receive as much attention as it used to.

See How Albert, Another App, Can Save Your Money Automatically

This, despite all the problems with Bank of America, was a clever extension of the coin jar metaphor into the digital age. Keep in mind, though, any interest you earn on savings in a bank account can be easily negated by account maintenance fees. You need access to free banking, especially if your savings isn’t large enough to produce interest that outweighs those fees.

Third-party services. Several penny-rounding and similar apps and services have popped up in recent years. These operate on a similar principle as the Keep the Change program, but are created by other entities.

One such option is Digit. This app tracks your bank account spending to watch for trends and habits. Then, it will transfer small amounts out of the account when you can afford it, to begin building a savings stash. When you’ve built up a little stash of cash (or on a weekly, monthly, or other regular basis), simply transfer it to your savings account and begin earning interest.

Another option is Acorns. This app hooks up to your bank accounts to track your spending. It rounds up the amount of each transaction to the nearest dollar, just like Keep the Change. When you get to a certain level of savings in the queue, it uses those funds to invest in low-cost EFTs.

Acorn is a little more sophisticated than past savings apps, since it invests your money rather than putting it into a savings account. With a $1 per month fee for accounts under $5,000 or .25% fees on balances of over $5,000, you could probably find lower-cost investments elsewhere. But if you have trouble saving, this could be an easy way to start investing without having to change your habits much at all.

There’s a drawback to automatic savings.

The advantage of creating this system for saving money can also create a money management problem. Once you stop actively making one particular decision with your income each pay period, it’s easy to forget what you’re doing and why you’re doing it. You need to continue to look at your financial status on a regular basis. Frequently evaluate whether the choices you made and set into motion with an automatic system continue to be the best options for you.

How Much Should You Be Saving? Check Out the 50-20-30 Rule

If you started by saving 2% of your income but your situation improved, have you also increased your savings rate? Can you get to 10% two years after starting your system? If you have been saving 10% and don’t feel any stress, is it safe to move to a 20% rate of savings? Once your system is a natural piece of your process — so much so that it is invisible to you — you could be giving up some control or awareness of your financial situation.

Personal finance is about making conscious choices with your money. That includes not using money without considering the circumstances. The present scenario changes over time, and a system does not relieve you of the need to see every pay check as a money-saving opportunity.

Automatic saving leads to success.

With that said, automating your savings could lead you to better success with your personal finances. With more savings, you can avoid expensive debt and reach financial independence sooner. Just set a reminder in your calendar to check back on your automated savings plan at least once a year, if not quarterly.

With review and tweaking, a system like automating your savings can make your personal finances less stressful and more successful.

How do you automate your savings?

Published or updated March 30, 2017.

About the author

Luke Landes is the founder of shizennougyou. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 7 comments… read them below or add one }

avatar 1 Anonymous

I’m self employed and I sweep every penny beyond immediate needs into a savings account, If I want to spend anything outside my budget I have to remove it from savings and that gives me time to think about it. I have some specifics items I am saving for, so I put as much in those accounts as possible. It seems that I won’t take money away from specific items the way I will a general savings account.

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avatar 2 Donna Freedman

I’ve got Capital One 360 as well, and really love the automatic savings aspect: out of sight, out of mind.
Additionally I’ve set up three sub-accounts. Although these are not automatically funded, I appreciate the convenience factor:
1. New Car Fund: We’re a one-car household. Every month my partner lets me know how much he spent on gas and I put one-half that amount into the new car fund. I also put my share of the insurance in there.
2. and 3. Nephews Fund. I put a few dollars ($10 minimum) a month in each one, for their eventual education. Sometimes when I want to buy them some treat or item that they don’t really need I add that amount to their deposits. They don’t have to have another toy or T-shirt — regardless of how cute! — but eventually they will need to go to college or trade school. While the accounts won’t be a lot of money, they will help with incidentals.
Best-case scenario: My income evens out enough in 2014 that I can do automatic withdrawals for the kids’ funds. Maybe for the car, too, based on how much we generally spend on gasoline.

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avatar 3 Anonymous

SavedPlus seems like an interesting idea. I was introduced to the 100% personal tax a little while ago, where all discretionary spending is matched with a transfer from checking to savings. You could probably tweak SavedPlus to do something similar for you so that it’s a more passive way to save.

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avatar 4 Anonymous

We are strong believers in the automatic savings. We think that the only real way to overcome the Endowment Effect ( is to save money automatically, in small increments and often. And this is exactly how SavedPlus is designed.
Daniel, thank you for the analogy with the personal sales-tax. Pay yourself first!

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avatar 5 Anonymous

I believe there are investment vehicles with some sort of life insurance element to achieve similar results. You deposit an agreed amount every month and they invest the money for you conservatively. generally the return is much better than the interest rate you would receive for your saving account. I think the term is called endowment. These investment vehicles may be solve the problem of regular access to your cash in the bank. And if you really need the money these policies can be sold for cash as well.

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avatar 6 Bela

I do some automated savings, recently expanding on it. I have a credit union account into which I added $200 monthly automatically, for the purpose of medical expenses. Then the ACA and penalties happened, and I transformed that account into a “taxes” account, having neither medical insurance nor a medical savings account. Incidentally, I do not have accounts named or designated by other than myself, so a medical savings account is not an HSA, and our retirement funds are not in an account so named by a financial institution.

I got refunded our ACA penalty by doing an amended tax return, put that in the credit union account and then transferred the year’s savings to a Capital One account where it can earn some interest. And I like the relatively high interest rate there so much that I created another automation from my primary checking account into Capital One monthly.

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avatar 7 Joey Mack

Great article. I’m an avid saver myself and tend to watch what I buy. To help me see if something is worth buying, I use a site called to calculate how many hours I have to work to buy something. This helps you determine if something is worth the time you’ve work to purchase it.

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