
Having trouble building a savings account? Can’t seem to make yourself put any money into savings? Many of us have experienced this problem. What I have found truly works is to make your savings automatic. This takes the emotional decision making out of your hands. It assures you will begin building something for an emergency, rainy day or your future retirement dreams. Whatever the reason you have for wanting to save, start today!
It is very easy today to set up an automatic savings plan. If your place of employment offers a 401k or the like, I highly recommend signing up. Not only will your savings be deducted automatically from your paycheck, but it will be taken out tax free. And many employers offer matching funds to your contributions, free money! Also, many employers can electronically transfer funds to your savings or brokerage account. Initiating savings at the paycheck level is in my opinion the best way to do it. It leaves you no opportunity to change your mind and use the money for something else. Unless of course you decide you just can’t live without that new $200.00 widget and withdraw the money from your account. Self control is a topic best left for another post! In all seriousness, you will need to think about how much money you can actually afford to put away in a retirement account. If you need the money and withdraw it, you will owe Uncle Sam the taxes, based on your rate, plus a ten percent penalty for early withdrawal. For those just starting out, it is probably best to build an emergency fund first. This can take a while to do and is usually 3-6 months worth of living expenses.
It is also possible to have automatic transfers made from your bank account to another savings or IRA retirement account. I would recommend setting up a separate savings account specifically for your “do not touch” money. You can have money automatically transfered from your regular checking and savings accounts every week or month to this account. I have an on line bank account at ING Direct, known as Orange Savings for this purpose. There are several advantages to opening an online account. First they have notoriously low or no fees. That’s a plus! Second, online banks typically pay a much higher interest rate than your neighborhood brick and mortar bank. Sorry Mr. Local Banker! And third and possibly most important, it is harder to get at your money, increasing the probability you will save.
So, that pretty much sums up putting your savings on autopilot. Of course if you don’t take the first step and set things up, nothing will happen and five years from now you will still not have any savings. You have to start somewhere. Start putting away something, anything, no matter how small and insignificant you think it is. It will begin to add up, interest will compound and a few years from now you will be very pleased with yourself for listening to me. Haha. I hear friends talking all the time about not having enough money to save anything. Of course they’re telling me this between bites of Crispy Creme donuts and swigs of Starbucks coffee. Go figure.
My name is John.

















{ 9 comments… read them below or add one }
It’s wise to think that way especially in these days. Thanks for the alert!
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Hi John,
This is a great article for people that have a hard time saving money. I know money is tight, but every little bit that you can put back helps. When I was working a public job, I did use the automatic savings account. It was nice to have!
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Always good advice John. Thanks for the reminder!
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Hello Axecity, Robin & Loraleigh! You’re welcome! I strongly believe that saving money, while not a very fun thing to do is EXTREMELY important!
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This is a great post and it makes me even more aware that I really need to start saving more money. I hate to admit it but I am terrible with saving money.
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The government knows the importance of getting paid first, as they have a first crack at paychecks before employees do, so why shouldn’t we do the same? It’s harder to blow the budget when the important stuff is taken care of right away. Nice stuff John!
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John reply on May 22nd, 2008 2:31 am:
@Heidi – I hope you will start saving. It is so important to our future. Most of us are terrible at saving, it just takes time to get used to it. Eventually, it becomes second nature and you don’t even think about it.
@Blake – You bet the government understands “Pay Yourself First”. They also love it when we overpay our taxes and take it in the form of a refund at the end of the year.
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Reading this post is almost like deja vu. Just yesterday I set up a regular savings account which automatically takes the money from my current account the day after I get paid. I am a recent University graduate and have only just started working full time. I got my first payment the Friday just gone and I decided that if the money goes straight into a savings account now I am not going to miss it because I will never get the opportunity to spend it.
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John reply on May 27th, 2008 10:17 pm:
Good for you! That’s great! You are exactly right, you won’t miss it. And if you gradually increase the amount over time, you will accumulate a tidy sum in no time. Keep up the great work!
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I would also stay away from larger financial institutions because they tend to prey on the uninformed and kill them on fees / commissions etc.
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LOL – I know what you mean about friends complaining they don’t have enough money and can’t pay down their debt, as they’re browsing an expensive department store trying on shoes they already have 3 pairs just like them at home.
I’ve always heard that your emergency fund should have 8 months worth of funds to pay the bills. I might be remembering wrong, though.
I personally don’t understand why people get emotional putting money into savings. I get emotional taking money out, even if the money is being used for something that’s necessary. If it’s a large sum of money, my heart starts pounding and I get anxious. I’d rather have the money in the bank just in case whenever possible. Not having that cushion makes me really really nervous.
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