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Paycheck Chronicles

Military Saves: Saving Automatically

As JJ mentioned, it's Military Saves Week.  Military Saves Week is a part of the Department of Defense (DoD) Financial Readiness Campaign.  It is designed "to motivate, support, and encourage military families to save money, reduce debt, and build wealth."

Today's focus is on Saving Automatically.  There are lots of important reasons to save:  to build an emergency fund, to plan for big purchases, or to save for retirement.  Automatic savings make it easier to accomplish any or all of these goals.

There are two main ways to set up automatic savings:  through an allotment from your military pay, or through automatic transfers from your bank account.  An allotment gets taken out before your pay gets to you, so it has the benefit of being easy to forget!  On the other hand, you can set up multiple automatic transfers to different accounts.  Our family has automatic transfers to our retirement accounts, our emergency fund, and several different savings accounts (car, vacation, I think there is another one.)  While I hate deducting that big number from the checkbook right after adding the paycheck each payday, I keep doing it because I know it works.

One trap with automatic savings is that you shouldn't use those savings for purposes other than what you've planned. One way to avoid this problem is to use a different bank or credit union, and make it hard to access.  Don't set up transfers between the banks, and don't get a debit card attached to that account.  Set it up so that you either have to physically drive to the bank (bonus points if it is far away) or have a check mailed to you.  This eliminates the temptation to borrow from your savings for any other purpose.  I, personally, am terrible at dipping into our emergency fund for non-emergencies.   (I know, I know.  It's a bad thing to do.  Everyone has a place where they're not good.  This is mine.)

I encourage you to set up some sort of automatic savings today.  Whether it's an allotment to your emergency fund, or a contribution to your Thrift Savings Plan, or an automatic transfer to a savings account for a new car, every little bit helps.  And doing it today is the first step.

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