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I was in the bookstore a few days ago, and I took a few minutes to read through some of the best sellers in the financial section. One thing that really stood out to me was the fact that there was a common theme throughout the majority of these books. Most of them talked about “automating” your savings in one way or another.
Instead of manually taking money out of your other accounts and putting it into your savings every month, by automating your savings you have a set amount of money put into your savings every month automatically (most banks offer this feature).
Its like putting your savings on autopilot – realistically its hard for most of us to always have to fly the plane.
This helps you save more because you then don’t spend that money (since you know its automatically going to be taken out every month) and learn to live without it for the time being.
Although I’ve head about this concept of “automating your savings” before, it wasn’t until then that it really clicked for me. I realized that you can accomplish this by using credit cards as well.
There are certain credit cards out there, such as One By American Express that automatically put away a certain percentage of the money you spend with the card into a savings account. For example, One by American Express puts away 1% of everything you save into an FDIC insured savings account. This account is opened in your name and the money is automatically transfered every month.
I like to call this category of credit cards “Savings Credit Cards.”
These savings credit cards are a great alternative for those who aren’t interested in the traditional rewards programs and are looking for a way to literally save money by using their card.
Over the last few months I’ve been automating more and more of my finances and although I don’t use this as a primary way to save money, its very nice icing on the cake.
Over time all of this money being put away into a high-yield account can really add up. Not only are you automatically saving a percentage of your money but your earning good interest on that money as well.
The best part is this all happens without you having to lift a finger. I am big on planning ahead with my finances and if you are trying to plan ahead for the next 5, 10 or even 20 years this can be a great way to start saving and avoid the temptations along the road.