If you want to build your savings, setting up automatic transfers is a good place to start.[1] You won’t have to worry about when or how much to transfer each month, and removing those barriers can be crucial if you’d otherwise wind up stuck in analysis paralysis.

While automated apps and solutions can help you save, too much automation may leave you with an unfounded sense of accomplishment. Before you set it and forget it, it’s best to figure out how much you need to save and plan to periodically check in to make sure the automated systems you put in place will get the job done.

Create a Plan and Figure Out How Much To Save

Automating daily, weekly, or monthly transfers may help you save time and mental energy. But you should carefully think through the initial steps of determining why and how much you want to save.

For example, if your goal is to build an emergency fund, you’ll want to start by determining your necessary monthly expenses (this emergency fund calculator can help you add up the results). Multiply those expenses by 3 to 12 depending on how long you want your emergency fund to last. Then, you can set up an automatic transfer to slowly build your emergency fund.

Other goals, such as paying off debt and saving for retirement, may be more complex. When paying off debt, you should make a strategic decision about which debts to focus on. Some people prefer to pay down the lowest balance debts first, while others want to focus on debts with the highest interest rates.

For retirement, you can start by setting a goal for how much of your income you want to save and invest. Perhaps your goal is to save 15% of your income, but you start at 5% or 10% with a plan to slowly increase your contribution rate over time.

Simple Ways To Increase Savings

One of the benefits of automatic savings is that it allows you to put funds aside without giving it too much thought. Over time, saving becomes a habit. Making small adjustments may help you gradually increase the amount set aside without making significant lifestyle changes. Try these simple tips.

Reallocate Spending Cuts

One way to boost automatic savings is by reallocating money saved from spending cuts. For example, if canceling a streaming service saves $30 a month, set up an automatic transfer of $30 to savings on the same day each month. This approach turns small lifestyle adjustments into steady progress toward your financial goals.

Take Advantage of Income Boosts

Pay raises and other income boosts create an excellent opportunity to increase auto savings. Rather than immediately adjusting spending to match new income levels, try allocating a portion of the increase to savings or retirement accounts. For example, when receiving a 5% income raise, consider increasing automatic savings transfers by 2% to 3%. This allows for greater savings while still giving the opportunity to enjoy a portion of the extra income.

Automation Can Help Put Your Plan Into Action

Automated apps and services can take several forms. Some banking products have automation features built-in and allow you to easily set up regular transfers from your checking to your savings account. There are also saving and investing apps that can analyze your bank account and make transfers after determining you'll have excess money after paying your bills. Some employers also allow employees to split direct deposits between multiple accounts. This is a simple way to automate savings directly from each paycheck.

Once you have a goal and plan in place, you can use these automation tools to ensure you're making progress. For instance, if your goal is to build your retirement account, you can set up automatic contributions to your 401(k) or automatic transfers to an individual retirement account (IRA).

 Jumping from contributing nothing to 15% of your income can be difficult. But you could set up a calendar reminder to slightly increase your contribution amount every 6 or 12 months.

The Benefits of Automating Your Savings

Putting aspects of your saving and investing on autopilot can be beneficial in several ways:

  • Remove a pain point: Transferring money into your savings when you know there are ways you could spend it today can be difficult. By setting up automatic transfers, you may find some relief from the mental burden of manually initiating each transfer.
  • Save time: Setting up automated savings may also save you time in the future, but make sure to plan before setting everything on autopilot.
  • Make budgeting easier: By automating your savings, you’re putting one of the core principles of budgeting and long-term wealth-building — pay yourself first — into action. Your savings get set aside automatically, and then you budget the rest for your other needs and wants.
  • Build good habits: Saving and investing don't come naturally to many people, but creating a plan and using automation can help make saving part of your everyday life.

Stay Involved and Flexible

Make sure you start with a thoughtful plan and reevaluate as you go. Here are a few ways you can help make sure you don’t let automation inadvertently lead you off track:

  • Check-in (at least) quarterly: If you keep a budget, you may have a close eye on your money throughout the month. If not, make sure to check in at least quarterly to see if the automated transfers and contributions still align with your goals.
  • Increase contributions when you can: Many financial goals, including building an emergency fund, can take a long time to achieve. Starting slow and getting in the habit of saving is important. See if you can increase your contribution amount a little each time you check in on your finances. You likely won't notice an extra 1% or 2% missing from your spending money, but it may make a big difference in building your savings over time.
  • Reassess and adjust to changes: Your goals and finances can shift following major events. Set aside time to rethink your plan after a job loss, promotion, birth, marriage, or other significant change.

No matter how much you start with, saving money can be an important part of building a solid financial future. With your goals in mind and a plan in place, you can use automation to take some of the day-to-day work out of the process, and stay flexible if your goals or situation shifts. You already have the basic structure in place, now you can update your processes to stay on track.