In today’s fast-paced world, saving money often takes a backseat to immediate expenses. However, implementing effective saving strategies doesn’t have to be complicated!
One such powerful, yet simple method is split direct deposit. This is a game-changer that can help you save more money without much work.
In this post, we’ll go over how split direct deposit works and how it can get your savings plan on track.
What is a split direct deposit?
Split direct deposit is a type of financial arrangement that lets you split your income or payment into several accounts.
Using preset percentages or fixed sums, you can distribute a portion of your salary to other accounts, such as:
- savings
- checking
- investment
- or retirement accounts
This is an alternative to depositing your entire paycheck in one account.
Usually, your employer facilitates this procedure by working directly with financial institutions or through their payroll system. You can automate this process by giving instructions on how your income should be split across the selected accounts when setting up a split direct deposit.
For instance, you could set aside a specific portion in a checking account for immediate needs and another amount in a different account for long-term savings.
What are the benefits of splitting my check into multiple accounts?
1. Automated savings.
It makes saving easier by putting some of your income into investment or savings accounts before it goes to your spending account. This automation makes it easier to save money over time without having to do any moves by hand.
2. Disciplined financial planning.
Setting aside money for savings, retirement, or specific financial goals as soon as the paycheck comes in is a good way to be more serious about money planning. This makes it less tempting to spend the whole paycheck without thinking.
3. Financial goal alignment.
- Building an emergency fund
- Saving for a down payment
- Investing for retirement
- Paying for a project
These are all good examples of financial goals that can be met with this method. Split direct deposit lets people put money in different accounts based on what’s most important to them.
4. Consistent investment.
For people who are saving for retirement or other long-term goals, split direct deposit makes sure that their bank accounts always have money coming in. This regular contribution can help with dollar-cost averaging and building wealth over time.
5. Enhanced financial awareness.
By putting money into different accounts on a regular basis, you become more financially aware and responsible. It gets people to keep track of how much they’re saving and pay more attention to how much they spend.
How to split your direct deposit into multiple bank accounts
You might be able to choose to have your paycheck directly deposited into more than one checking or savings account based on a percentage or dollar amount. This depends on how your company handles payroll.
Figure out how you want to divide your pay between your accounts. Calculate how much or what share of your money you want to put into each account (savings, checking, investments, etc.).
You can set a certain percentage (say, 5% or 10%) to send to your separate savings account while you send the balance to your checking account. Alternatively, you could set a certain amount of money from your paycheck to go into savings every month, like $200, $400, or $700.
If you split your paychecks in this way, your savings plan will be on track. Plus, you would know how to live below your means, which is a key attribute if you want to build and maintain wealth.
How to split your paycheck effectively
- Set clear financial goals: Set clear goals for every account. Make sure your investments are geared toward specific goals, like saving for a trip, an emergency fund, or retired life.
- Prioritize savings: Put a big chunk of your income into savings, while still making sure you have enough for basic needs.
- Start conservatively: If you’ve never used split direct deposit before, start by putting small amounts into savings or other accounts. It’s best to slowly raise these amounts as you get used to the system.
- Diversify allocations: For balanced financial growth, you should consider spreading the money out among several accounts, such as an emergency fund, a retirement account, an investing account, and so on.
- Use budgeting tools: You might want to use budgeting apps or tools that help you keep track of and handle many accounts. These tools can make budgeting easier and give you information about how you spend your money.
- Adjust and review periodically: Check your split direct deposit amounts every so often. If your financial position or goals change, you may need to change the percentages.
How much should I be saving?
This depends on your situation, your income, your expenses, and your financial goals.
There isn’t a single right answer, but the 50/30/20 rule might help. This means putting 50% of your income toward things you need, 30% toward things you want, and 20% toward savings.
It’s important to check your budget often and make changes to your funds as your needs change. The end goal is to find a good mix between putting money away for the future and living a nice life now.
Split Direct Deposit: Final Thoughts
Split direct deposit is an easy way to save money and plan your finances automatically.
People can set aside money for savings, emergencies, retirement, or other important financial goals without having to manually move funds or make a budget by allocating funds before they reach the spending account.
This money-saving plan encourages focused saving by setting aside a regular amount of money for different financial goals.
Additionally, it helps people maintain a structured approach to handling their money and encourages a more even distribution of funds across various accounts.
Overall, split direct deposit is an easy-to-use tool that can help you save money and handle your money better.
