Need an easy way to save? Do you have the best intentions to save consistently, but something always comes up? Direct deposit may be the solution. A direct deposit is an electronic payment that is automatically deposited into your account. It’s a secure, fast, and convenient way to ensure your pay is deposited on time. Your pay is deposited into a savings or checking account and is usually available a day earlier.
However, did you know that direct deposit could also be a powerful tool to help you manage your finances better and save you money? It’s a consistent way to prioritize and automatically save money from every paycheck without much effort on your part.
Here are a few ways direct deposit can help you save money:
Automate Your Savings
One of the easiest and quickest ways to build your savings is to split your direct deposits. Instead of having all your funds deposited into one account, you could split your deposits and deposit a certain amount into a savings account and a checking account. In most cases, you’re able to split your direct deposit up to four different accounts.
Before you set up a direct deposit for your savings, establish a budget to determine how much you can afford to save from each paycheck. You may have to start with a small amount, but the goal is to start saving. For example, if you save $20 each pay period and you’re paid twice a month, you will save $480 in a year if no withdrawals are made from the account.
With direct deposit, you never have to think about making contributions, and you’re less likely to spend your savings. You can sit back and watch your savings grow.
There are other ways a direct deposit can help you save.
Many financial institutions waive certain fees such as monthly maintenance fees and check cashing fees if you use direct deposit.
You could use direct deposit to help pay your bills on time and avoid late fees.
You could save time because it reduces the need for making extra trips to your financial institution to make a deposit. Also, there’s no wait time for the check to clear.
How do I set up direct deposit?
Most employers offer direct deposit instead of issuing paper checks. Setting up direct deposit is relatively easy. Simply complete your employer’s direct deposit form or the Direct Deposit Enrollment Form, and submit it to your employer or the agency that’s sending the payment. There may be different direct deposit forms, but here’s the necessary information needed to start the process:
Your financial institution’s routing number
Your account number of where you want the funds deposited
Your financial institution’s address and telephone number
The first direct deposit may take up to two pay cycles to process. You can change the direct deposit any time you want to adjust your contribution.
Out of sight, out of mind. Direct deposit is the way to go if you’re looking for a quick and easy way to save money—no extra trips to the bank or worries of a lost or stolen check. If you can resist the temptation to withdraw from your savings account, you may be surprised how quickly your savings will grow over time.