Make Your Direct Deposit Account Work Harder for You
According to the National Automated Clearing House Association (NACHA), 82 percent of Americans are paid via direct deposit. What makes it so appealing? Besides the convenience of not having to deal with a paper check every time you get paid, there are real financial advantages to setting up a direct deposit account.
Here's how to make direct deposit work harder and save you more money.
Split Your Payroll
When money goes straight into your savings account, you're less likely to spend it. Diverting a fixed dollar amount or a percentage of your paycheck into a savings account via direct deposit makes it a breeze to save automatically. You can also split other direct deposit payments, such as income tax returns from the IRS, into multiple accounts.
Watch Your Savings Grow
Even contributing a small portion of each paycheck to your direct deposit account helps your savings flourish. A mere $50 a month adds up to $3,000 in five years. Plus you'll likely earn interest on this money, giving you cash for simply keeping it in the bank. As you save more, your savings account balance will grow. Many banks offer higher interest rates for accounts with bigger balances, so your interest income could increase significantly.
Depending on how much money will go into your direct deposit account each month, using direct deposit may even help you avoid monthly savings account fees. This adds up to more money in the long run.
Build Financial Security
In 2016, the Federal Reserve released a statistic that revealed how deep America's savings challenges run: 46 percent of adults would be unable to cover a $400 emergency expense – or they'd have to either borrow money or sell something to do so. This is especially scary because each year 22 percent of Americans pay out of pocket for an unexpected medical expense.
These facts are a tough wake-up call, but it's also an opportunity to get your financial health in good standing and feel prepared for whatever life may throw at you.
By making changes to your saving (and spending) habits now, you'll be able to take care of unexpected costs in the future. Plus, direct deposit will remove the temptation of spending today what you should be saving for tomorrow. While it might be tough to get used to at first, you'll be grateful once you see how even a little money every month compounds into huge results over time.