The ‘Set-It-and-Forget-It’ Trick Financial Planners Swear By To Build Savings Fast
Written by
Laura Bogart
Edited by
Kristen Mae
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In the rush of daily life and competing priorities, it’s easy to forget that your savings accounts need attention too. When cash sits in your checking account, it’s easier to spend impulsively. If you’ve ever wished there were a way to “set it and forget it” when it comes to saving, you’re in luck. Thanks to automation, padding your savings accounts can be much simpler.
Many financial advisors praise automation for good reason: It allows you to funnel money into savings and investment accounts regularly, without needing to remember to move it each time. Still, there are ways to make automation work even more effectively for you and your money.
GOBankingRates caught up with James Gilliver, chief of operations at Unity Mutual, and Annie Ma, vice president of product and general manager for savings and mobile at Oportun, for their insights on the “set it and forget it” approach.
Automation Puts Your Best Intentions Into Action
Gilliver acknowledges that most people have good intentions about saving. Then life gets busy, and distractions pop up like a game of whack-a-mole. The power of automation is that it removes the legwork of consistently saving.
“Setting up a direct debit means you make a commitment up front, and then your savings take care of themselves in the background,” he said.
When You Automate, You Don’t Feel Like You’re ‘Losing Money’
One of the biggest hurdles to saving — beyond being busy — is the feeling that you’re “losing” money when you move it out of checking. According to Gilliver, automation alleviates that sense of missing out because it transfers the money into savings before you even notice it’s gone.
“You’re simply paying yourself first, before you even get the chance to spend it,” he said. “That little trick helps people stick with their goals without really noticing the difference day to day.”
There’s a Smart Time to Schedule Your Automation
Once you’re ready to automate, your next question might be when the money should come out of your account. Gilliver said the ideal time to do it is immediately after payday, once you’ve covered your essential expenses.
Automation Can Help You Achieve Your Savings Goals
Ma said automation can be most effective when it supports specific savings goals. She encourages identifying short-, medium- and long-term objectives, then automating set amounts of money toward each goal.
“A short-term savings account can help cover at least a few months’ worth of living expenses,” she said. “But putting money away for an upcoming purchase or vacation is a good medium-term goal, while a down payment on a home, college or retirement might all be important long-term goals.”
Funneling money into a high-yield savings account allows you to earn interest over time, helping your money grow and bringing you closer to your goals. With automation, you can be intentional about saving for major life milestones — without stressing over it. Just be sure to regularly review your automated transfers to ensure they still align with your financial priorities.
Automation Doesn’t Require You To Save Everything at Once
Though it can be tempting to put large sums into savings for quicker growth, the beauty of automating regular contributions to a high-yield savings account is that even small amounts can go a long way.
Ma said you don’t need to fund your entire savings goal at once. If you’ve structured your goals into separate “buckets,” you can let time — and compound interest — do the work for you.
“With your goals and buckets in mind, begin putting away a little bit at a time on a regular basis,” she said. “That will also put the power of compound interest to work on your behalf.”
Bottom Line
You juggle a lot of responsibilities in life. With automation — the “set it and forget it” approach to building savings — you can remove one item from your mental checklist. Setting up automation isn’t just easy. It’s one of the most effective ways to make saving a consistent habit and build wealth over time.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
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