Your Paycheck Is Dying in Your Bank Account — Here’s How To Save It
Written by
Karen Doyle
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
You probably get your paycheck direct deposited into your checking account. Then, you use that money to pay your bills — maybe automatically, so you never miss a payment. That’s a great strategy, because everything gets paid on time, and the money you have left over sits in your checking account, ready for an emergency or a splurge. Right?
Maybe not. Here’s what you need to know about how to save your paycheck if it’s dying in your bank account.
Put Your Money To Work for You
The most grievous error you’re making by letting cash pile up in your checking account is that it’s probably not even earning interest. That means that, as inflation erodes your purchasing power, you’re actually losing money by leaving it in your checking account.
You have a couple of options for where to park spare cash besides your checking account. If you think you might need it for an emergency, put it in a high-yield savings account. You can add to it or withdraw it at will, and you’ll earn a little bit on whatever’s in there.
If you can live with a little more risk or want to have some fun with it, open an investment account at an online brokerage firm. You can play it relatively safe with mutual funds or ETFs, or you can buy individual stocks and see how your instincts are. Just remember, you can lose money investing in the market, so don’t risk more money than you’re willing to lose.
Resist Temptation
Here’s another good reason to get that extra cash out of your checking account: You’re less likely to spend it. Admit it — you see that balance the day before payday and you think, “I can go out to lunch,” or buy the shoes or whatever your weakness is. And you do it because you know your paycheck is coming and your bills are covered.
But if you’ve moved that money into your savings account already, you won’t see it there when you open your banking app to see if your direct deposit hit yet. You’ll be more intentional about your spending if you have to take money out of your savings account to make that purchase.
Pay Yourself First
There’s a reason your grandmother always told you to “pay yourself first.” She meant you should set aside part of every paycheck for savings, and she said it because it works. Rather than paying everything and saving what’s left, you prioritize your savings and make your budget work with the funds you have remaining after you’ve socked away a specific dollar amount or percentage of each check.
You already do this with your retirement plan contributions — that money is deducted from your pay before you ever see it. You can do the same thing with your savings. Set up an automatic transfer from your checking account to your savings account every payday. When you get a raise, increase the amount. Regular saving is the key to building wealth.
Pay Down Your Debt
What if you could earn a 25% annual return on that extra cash? Then you’d think about doing something with it, wouldn’t you? Well, if you’re carrying a balance on a credit card, you’re probably paying 25% or more in interest every year on that balance. Pay that off and you just earned yourself 25% on your money.
If you don’t carry a balance on your credit cards, you can still benefit from paying down debt. Make an extra student loan payment or car payment every time that balance reaches a certain point. You’ll pay off your loan faster, and pay less in interest.
Leaving extra cash in your checking account is a losing proposition. Even if you get interest on your checking account — and most people don’t — it still isn’t keeping up with inflation. So put that money to work for you instead of letting it languish in your checking account. Your future self will thank you.
More From GOBankingRates
