Lending Club Blog

Start Your Savings Plan for Life

Upon graduating from college, you find a job and a place to live; it is also a perfect time to learn how to set up an automatic savings plan for life. If you develop the habit of saving now automatically, it is more likely to last for your entire lifetime.

The setup: Most companies now offer direct deposit as a way to receive your paycheck. And they allow you to pick which account the money goes into. They will also let you divide up your paycheck, either by percent or whole dollar amounts, and the company will deposit the money into different accounts. Read your company’s policies about payroll deposits before calling your HR department to ask for this setup.

If you have never saved on a regular basis before, start with five percent of your paycheck, and have it deposited directly into your savings account. If this seems too high, start with two percent and put it on your calendar to move it up in three months. Do not select the option of having a set amount taken from your paycheck, because you want the amount to grow when you receive a raise or bonus.
Have your savings account at a different bank from where your checking account is, and make sure to close the ATM card or any other access you have to the savings account. You only want direct deposits into this account and no easy way to take money out.

Why this works: This is a psychological trick that you play on yourself. It comes down to the idea that you don’t see the money, so you are less likely to spend it. Because it doesn’t exist in your checking account, you are less likely to act on an urge to spend it on something in the moment. This way, you can set it and forget it, and you will not have to remember to save something at the end of the month – because you most likely will not have any funds left over to save.

Thursday, August 21st, 2008 at 12:42 pm

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