28% of Americans do this smart thing to increase their savings

It pays to follow their example.

Key points

• Many people are eager to grow their savings in the New Year.
• There is a smart move you can take that will prevent the temptation to spend.

What could an improved savings account balance do for you? A lot, in fact.

On the one hand, it could protect you against unexpected bills or job loss. In fact, as a general rule, it’s a good idea to have enough money in the bank to cover three to six months of essential expenses. This could help you avoid layoff, or it could come in handy if your car breaks down, your heating system suddenly needs a major repair, or if an injury takes you to the hospital with a very expensive emergency bill.

In a recent Bank of America poll, 40% of people say saving more money is a major goal for the New Year. And 28% of them are already making a smart move that should bring them closer to this goal: automating their savings.

Put your savings on autopilot

There are several reasons why you may have struggled to save money in the past, but let’s face it – the temptation to spend on non-essentials is likely great. If you’ve repeatedly run out of savings because you’ve been tempted by concert tickets, take out, or going out with friends you didn’t want to say no to, you’re not alone.

Not only can social pressure cause you to spend more than you expected, it’s easy to fall victim to impulse buying just about anywhere, whether you’re shopping online or picking up a few groceries. at the supermarket. This is why using automatic savings tools is a great way to stay on track.

When you automate your savings, you are ensuring that a portion of every paycheck goes from your checking account to a savings account. This savings account can be a traditional bank account that pays you a small amount of interest, or it can be a retirement savings account like a 401 (k) or IRA.

If you don’t have a fully loaded emergency fund (with enough money to cover three to six months of bills), your first goal should be to build up short-term savings. If you’ve hit that mark, then you can focus on saving for retirement. But either way, automating your savings will make it harder to overspend, as some of your money will disappear before you’ve even had a chance to touch it.

Suppose you want to add $ 300 per month to your savings account in 2022. If you take the approach that you are trying to spend wisely during the month and transfer that $ 300 at the end of the month, you might not achieve your goal. But if you send that $ 300 a month into your savings at start of the month and then working with the remaining money your paycheck gives you, effectively forcing yourself to meet your savings goal.

Setting up an automatic transfer

Most banks allow you to easily set up a check-to-savings transfer. But if you’d rather focus on building a retirement nest egg, you’ll need to find an IRA with an automatic transfer feature. Not all IRAs do, but many do, so you will need to do some research.

Meanwhile, if you have access to a 401 (k) plan as part of your job, the only way to contribute is to make automatic savings. You’ll tell your payroll department how much you want to deduct from your pension plan, and they’ll take care of the rest. This money will then disappear from your paychecks right off the bat, so there is no temptation to spend it.

Growing your savings takes a lot of discipline. If you’ve ever struggled to save money, it’s best to put the process on autopilot. Even if you haven’t had a hard time saving up in the past, automating the process could still be to your advantage and help you achieve the goals you set for yourself.