Reduce financial stress and achieve personal goals when you automate savings.
With inflation pushing up the price of most goods, it can be tempting to use credit to meet your monthly bills. But to avoid accumulating costly debt, it’s more important than ever to prioritize your savings.
Having money in reserve keeps you on track to reach your financial goals and prevents the financial stress that can undermine your physical and mental well-being. Consumers’ stress about money has risen to the highest level since 2015, according to a March 2022 survey by the American Psychological Association. More than 80% of those between the ages of 18 and 43 reported that money is causing them significant worry.
It can be hard to remember to set aside money for savings, however, especially when paychecks do not stretch as far today as they once did. The solution: Automate your savings habit with a regular transfer of a set amount from your paycheck or your checking account to a savings account. The easier the savings process, the less likely you’ll be tempted to spend more of your paycheck than you intended.
How Automated Savings Works
Automating your savings works on the same principle as depositing a percentage of your paycheck into a retirement savings account. You are much more likely to save if you don’t have to manually move money into a savings account each week. For example, Fifth Third Momentum® Smart Savings enables you to put your savings on autopilot so you don’t have to decide how much money to tuck away each paycheck.
You simply designate how much money you want to save each week or month using a mobile app or online portal. Then the money automatically moves from your Fifth Third Momentum® Checking Account to your Fifth Third Momentum® Savings Account.
You can also set specific goals for your savings within the app and track your progress toward them; you can create up to four savings goals at a time. Fifth Third has an easy-to-use online savings calculator to help you figure out how much you need to save to achieve a particular financial goal.
Save for Emergencies
Having a cash cushion can help you manage unexpected or emergency expenses, such as medical bills or the repair bills when the basement floods or your car’s brakes go out. Being able to dip into emergency funds means you don’t have to run up debt on a credit card or take out a personal loan.
Emergency cash can also temporarily replace your income if you lose your job or have an extended illness. Yet, 4 out of 10 adults don’t have the cash available to handle even a $400 expense, according to Federal Reserve data. And a recent Bankrate poll found that 58% of people surveyed said their emergency savings fell short.
Over time, you should aim to accumulate enough emergency savings to cover three to six months of living expenses. One way to boost your emergency fund is to designate a portion of a windfall—a tax refund, inheritance, bonus, or cash gift—to savings.
Afford a Down Payment
Without saving for a down payment on a house you’d like to buy, you won’t be able to get a mortgage from a bank. The minimum down payment is usually around 5% of the home’s purchase price, but you’ll receive more favorable interest rates on a mortgage if you can put down more. And by making a down payment of 20%, you won’t have to pay for private mortgage insurance. A larger down payment will also reduce your monthly mortgage payment because you will be borrowing less.
When you are in the market for a new car, the greater your down payment, the better the interest rate on a car loan. Even better, if you buy the car outright you won’t have a payment at all.
Pursue a Dream
Saving affords you the flexibility and financial freedom to take a chance on a venture that you’ve always wanted to try, such as starting your own business or taking a year off to travel. You don’t have to be independently wealthy to live life on your own terms, but you need savings to take the types of risks that can pay off in the long term.
Realize Your Future Financial Goals
For bigger financial goals, such as saving for a child’s education or your own retirement or buying a vacation home, you need to get started on savings sooner. But you don’t have to allocate all your cash reserves to these long-term goals. Designate some of your savings to shorter-term goals, such as creating a vacation fund or upgrading your kitchen, so you can enjoy life now.
Make Saving Painless
Gradually building your savings requires deferring some gratification. But being diligent about saving by automating the process can ultimately be more satisfying as you achieve personal goals and financial freedom.