Splitting up never felt so good: How to save by splitting your paycheck

America Saves Week is a time to make sure you are taking advantage of opportunities – like the most effective way to save, saving automatically through work.  This is a great time for a check-up or in some cases a wakeup call to see how you are doing financially.  The first step in saving, is to make a goal for yourself.  t save, you lose out on the opportunity to have the power to decide how to spend your money. 

Unfortunately, for those who haven’t been able to put money away, their bills and expenses decide how they spend.  This makes it harder to own a home, a good car, or to go on vacations.  It also makes it nearly impossible to have money for emergencies.  To meet monthly expenses, some people have to run up credit cards and take out PayDay loans that take a long time to pay off and have sky-high interest rates.  For many people caught in this debt trap, their financial plan is all about managing their debts (rather than paying them off, or saving money)  In fact, 76% of payday loans nationally are taken out by repeat customers.  If you are having trouble with out-of-control debts, visit the America Saves page dedicated to helping people shed their debts

Use direct deposit and split pay

In order to save, try having your pay automatically deposited into your everyday account.  Have the bank take out a small amount from that check and put it into a savings account.  Start with a small amount that you won’t notice (Even $20-$25)  When you ask the bank to do this, tell them not to charge you any fees on the extra account!  If there is a fee, ask what you can do to avoid it. (Also try asking the bank to waive the fee, so you can keep all of your money)  That account will build up over time and start to provide you opportunities to take charge of your own money.  Even though you start small, the balance will build up over time.  At $25 per pay, within six months you will have a balance of $300; in a year, that amount will be doubled to $600.  

Use America Saves Week as a time to commit to yourself to save. Join Cleveland Saves .   Among their many resources is a page that shows 101 different ways to save.  Then contact your employer to ask that the amount you decided to save towards your goal be direct deposited into an account in which you want to save. In the U.S., 83% of the employees who use direct deposit and split a portion of their pay into an account other than a sponsored retirement account, are saving successfully using this system, and saving successfully for emergencies.  Good luck and Happy Saving!

Posted by: George Barany, Consumer Federation of America: Director of Financial Education