How Out-of-Sight-Out-of-Mind Can Help You Build Your Savings

Building up savings is a challenge for many people, yet it’s essential to long-term financial stability. If you’ve struggled with accumulating savings, here’s how you may better build your savings by putting the money out-of-sight and out-of-mind.

What Savings Are

Savings are a portion of money that’s set aside for a specific purpose. This money can be used for almost anything that’s not bought regularly or impulsive.

You may save up for an emergency fund, a major purchase, a vacation, retirement, college or almost anything else. For reference, many people recommend having an emergency fund that’s 3 to 6 months of your expenses. Saving 15 percent of your income for retirement is also commonly recommended, and you also should be saving for those other significant expenses that you’ll incur.

Whatever the expense is, you’ll have to save so long as you can’t afford to pay for it within your regular cash flow — and saving requires leaving the money alone.

How To Automate Savings

Although the concept of putting money aside for something specific and not touching those funds is simple, this is also where the struggle of savings lies. Not touching money simply isn’t easy to do, especially when there are so many things you want.

One of the most effective ways to address spending temptations is to automate your savings. When the money is out-of-sight and out-of-mind, you’re less likely to consider spending it on something other than the intended purpose.

To automate your savings, set up automatic deposits into an account that you don’t regularly use. It might also be a tax-advantaged IRA or 529 accounts if you’re saving for retirement or college.

You can set up automatic deposits in several ways:

• Create recurring transfers that move money from a main account to the savings account
• Direct all of one income source (e.g. gig work or child support) to the savings account
• Split direct deposit payments into two portions, one for spending and one for saving

The main aim is to make the transfers recur without your involvement, so you don’t have to think about where that money is going.

Avoid Making Excuses

First, set up your account and transfers. Then, the only other detail is to avoid making excuses. You can always think of a justification for spending savings on something other than the intended purpose — don’t do this. Instead, find other ways to pay for your recurring expenses and buy the things that you want.

Doing this won’t be easy, but it’ll become less difficult the more you do it. You’ll also be glad you didn’t come up with excuses when you’re faced with the actual intended expense.

Start building your savings today, and you’ll be glad you did in a few months or years from now.

About the Author: Scott Brodie is a freelance writer covering education, insurance and finance. He is often found with his cup of coffee and faithful dog at his side.