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.

So you have scrimped and saved. Done without some of life’s luxuries. You have managed to build up a nice little nest egg. You have plans to retire in comfort. And then it happened. You started using your shinny, new 401k debit card. Borrowing against your future.

So, where do I sign up!

According to the ReservePlus website, signing up is a simple 3 step process. You simply select the ReservePlus option within your participating company plan. Move desired funds into an dividend bearing account. And presto, you receive your new card. Swipe to your hearts content, or a least up to your new loan limit.

Everyone else is doing it, why can’t I?

Is it just me or does this sound like an absolutely crazy idea to anyone else? Let’s see.  Now, digi-thirsty, consumer electronics lovers can satisfy that overwhelming urge to purchase that 60″ LCD, immediately.  With their retirement money!  Home equity tapped out?  No problem!  Just swipe and forget.

A brilliant Idea!

What will we think of next? A future’s market for….I don’t know… kidney transplants. That’s right! You agree to give up your left kidney at a set future date. In exchange you receive a lump sum TODAY, which you can then use to address that electronics driven euphoria. No, there isn’t really a kidney futures market. Sorry.

I’m only going to use it this one time, I promise.

I hope we as Americans will use better judgment than we have shown over the last several years. As if it were not bad enough that we have collectively sucked billions of dollars out of the value of our homes. Using our home equity like a lottery windfall. Now, we will begin siphoning off our retirement savings, to further quench our appetite for instant gratification.

At least in the past, borrowing against your 401k was somewhat complicated. One had to fill out paperwork and wait a week or two for the check. This debit card will make it much easier to justify in your mind, that impulse buy. No cooling off period. Just do it! Bad news for your retirement plans.

These fees are killing me!

To participate in this privilege will cost you. First there is the 10% early withdrawal penalty. Next, you will have to deal with Uncle Sam. And then there are those setup fees. And it looks like the interest will cost you Prime plus 2.9%. Bottom line. You will loose $30 - $40 out of every $100 borrowed, plus interest.

Now, the proponents of these cards point out that employees can withdraw money from an ATM and then pay it back at the end of month. Just like that. Just pay it back. Just like your credit cards, right? I’m not buying. How about you?